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Morning Coffee: J.P. Morgan says everything you expected in 2016 is wrong. Morgan Stanley done with fixed income job cuts for a year

Marianne Lake, JPMorgan, J.P. Morgan, Chase, Morgan Stanley, fixed income job cuts, Morning Coffee

Marianne Lake is the CFO of JPMorgan Chase & Co.

Not long ago, investment banking divisions (IBD) were thriving and markets divisions were not. Things have changed. M&A deals are lower than expected, and suddenly markets businesses are outperforming.

“If I look at overall revenues year-over-year, they are more flat,” said Marianne Lake, the CFO of JPMorgan Chase & Co. yesterday, as reported by Bloomberg. “That’s because the upside that we’ve got in markets is offset by lower fees in CIB, and lower asset-management and card.”

Despite the flat outlook for overall revenues compared to last year and costs of approximately $56bn for this year, Lake, speaking at Morgan Stanley’s Financials Conference in New York, stood by JPMorgan’s forecast for Q2 trading revenue to grow by 15%. The trading business was greeted with pessimism heading into 2016, whereas M&A advisory was expected to continue to be a cash cow for the big investment banks this year.

While Microsoft’s acquisition of LinkedIn has increased the hopes for an M&A rebound, times have certainly changed – as have banks’ outlooks – as we approach mid-year.

Separately, in December Morgan Stanley announced that it would axe 25% of its fixed-income staff, including 470 traders and salespeople, but the job cuts at its fixed-income, currencies and commodities (FICC) business appear to be over – for the time being.

James Gorman, the CEO of Morgan Stanley, claimed that he has finished eliminating jobs in fixed income – he doesn’t anticipate major FICC headcount reductions for the next 12 months, anyway – and is now focused on “rebuilding morale” in the unit.

Despite the fact that Morgan Stanley generated FICC revenue of $873m in Q1 of this year, down 56% from $1.9bn in Q1 2015, Gorman said that the business is capable of generating $4bn in annual revenue going forward.

Gorman also provided details on a $1bn cost-cutting plan, “Project Streamline,” that involves scaling back on non-client travel expenses, shifting 1,250 support-staff members to lower-cost offices in cities such as Bangalore, Glasgow and Baltimore, and slicing the number of computer servers in half.

Meanwhile:

A former UBS equities salesman sought more than $1 million in a lawsuit over his departure, but because he didn’t work though his notice period, instead he will have to pay the bank $42k. (Bloomberg)

These eight investment banks are stuck in Wall Street’s “Valley of Death,” where banks have the cost base of a scale player but the revenues of a niche firm. (Business Insider)

Gunit Chadha, Deutsche Bank’s Asia-Pacific CEO, has decided to step down. (Reuters)

“Any banker with a brain is saying to himself or herself, ‘Do I need an exit strategy, and if so, what is my exit strategy?’ And the reality is that a lot of folks in corporate America have been doing better on average.” (Business Insider)

How do you hedge against a Donald Trump presidency? It’s a question Wall Street traders are increasingly asking, and Citigroup and Barclays say they have figured it out. (Bloomberg)

Paul Singer, the billionaire New York hedge-fund manager known for his conservative political stance, won’t donate to the Republican convention in Cleveland or attend events there. (Bloomberg)

British banks are bracing for Brexit by ramping up their borrowing. (WSJ)

Wells Fargo is ramping up its competition with fintech start-ups and claims that bank customers will have no reason to use such alternative ventures. (FT)

Wells Fargo CFO John Shrewsberry is seeing a greater appetite for acquisitions from corporate clients. (Reuters)

UBS has hired Carolanne Minashi, a former Citi executive, as its head of diversity. (finews.asia)

Many large US companies pay lip service to diversity but have made little actual progress toward putting women on their boards. (Bloomberg)

Matthew Courey, the former head of high-yield bond trading at Credit Suisse, is joining a fund started by David Allen, a money manager who recently left the $217bn Canada Pension Plan Investment Board. (Bloomberg)

A 24-year-old Goldman Sachs investment banking analyst who recently graduated from Harvard died after competing in a Connecticut triathlon. (CNBC)

Barclays has hired Tim Main, formerly of J.P. Morgan and Evercore Partners, as the chairman of its financial institutions group. (Reuters)

Henry Kravis recalled a particular deal that he lost to Warren Buffett that inspired him and his KKR colleagues to move into a new area. (Business Insider)

Schroders has announced a host of senior moves in Asia Pacific. (International Adviser)

Citi, Deutsche and JPMorgan are facing intense criticism for backing fossil fuel. (FT)

Goldman Sachs annoyed Bank of America and other Wall Street banks that that funded last year’s biggest leveraged buyout when it sold $100m of the risky loans at 85 cents on the dollar. (Bloomberg)

AOL co-founder Steve Case is hiring, as Revolution LLC, the investment firm he runs, raised $525m for a growth fund. (Bloomberg)

Who gets venture capital funding? It doesn’t matter if you dropped out of college, but it helps a lot if you’re a man. (Bloomberg)

Being bilingual rewires the fundamental structure of your brain. (Quartz)

 

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