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Morning Coffee: The best bank for getting rich now. Ex-banker resurfaces in dull role

Citi pay, Citi, Citibank, pay, comp, compensation, bonus, bonuses, salary, Wall Street, banks, banking, bankers, analysts, Mike Mayo, Wells Fargo, UBS, Credit Suisse, First Boston, Jamie Dimon, J.P. Morgan

Benefit from animal spirits

Now’s a good time to be a Citi banker with an employee stock option or stock bonus.

Citi’s bonuses tend to include more cash than many of its rivals on Wall Street – however, up to half of the incentive compensation that the bank hands out is still in stock.

While you’d typically prefer a cash bonus, the opposite may be true in this case, as Wells Fargo Securities’s new star banking analyst, Mike Mayo, predicts that Citigroup’s stock price, which has risen 4.1% year-to-date, is likely to double in the next four-to-five years.

Citi is expected to see the best improvement in return on equity (ROE) and cost of capital among its Wall Street peers, per Mayo, who recently joined Wells Fargo from CLSA Americas and previously worked at UBS, Lehman Brothers and Credit Suisse First Boston.

Even though Mayo said that Citi will likely miss its new aggressive 14% return target on common tangible equity, he added it to Wells Fargo’s priority stock list, projecting that the U.S. bank’s ROE will increase from 7% last year to about 9% in 2019 and 11% in 2021 thanks to buybacks and other factors, as reported by Reuters.

The Federal Reserve recently gave Citigroup the green light for a plan to buy back $15.6bn of stock and pay $3.3bn in dividends over the next 12 months.

A generation of bankers at Citi had their bonuses wiped out during the financial crisis, and this is an opportunity to make amends to those who stuck it out.

Mayo has a reputation for asking pointed, critical questions during earnings calls and other investor events – the New York Post dubbed him a “Wall Street gadfly” – and he’s butted heads with many a bank CEO, including Jamie Dimon.

In a review of Mayo’s book, Exile on Wall Street: One Analyst’s Fight to Save the Big Banks from Themselves (a title inspired by a classic Rolling Stones album), Fortune Magazine wrote that he’s “such a weirdo” and “convincingly shows himself to be pretty punk rock among sell-side analysts. He called the bottom in bank stocks in 1994, and he was derided for it until the markets proved him right. He said to sell those very same stocks in 1999, a move that he asserts got him fired from Credit Suisse First Boston.”

Mayo dedicated two full chapters of that book to his intense battles with none other than Citigroup. My, my … how times have changed.

Separately, not everybody leaves their banking job for something exciting like cultivating cannabis or intellectually stimulating like working in academia. Some bankers switch careers only to end up in a job that is, well, painfully boring.

A great example of this is Tom Bolton, who quit his job on the Northern Europe investment-grade debt capital markets team at BNP Paribas, according to Reuters.

This month, Bolton will become group treasurer at Thames Water, the British private utility company responsible for the public water supply and waste water treatment in London, the Thames Valley, Surrey, Gloucestershire, Wiltshire and Kent.

You may feel that, in some ways, banks are becoming like utilities, but this guy left for an actual utility company. Sure, it may be a bit dull, but you can’t beat the job security.

Meanwhile:

MBA career coaching start-ups are using AI and machine learning to help students find jobs. (FT)

Only 19% of recent MBA graduates say bulge-bracket banks are a top employment choice, a drop of 7% from last year. (Bloomberg)

Goldman Sachs had a reason for seizing a client’s 217-foot yacht – and an Andy Warhol painting and rare wine collection could be next. (WSJ)

There’s one thing that separates banks that bounce-back after hard times from ones that don’t. (Bloomberg)

While the Dodd-Frank Act is none too popular on Wall Street, others argue that it didn’t go far enough. (Bloomberg)

It’s been a full decade since BNP Paribas froze funds exposed to U.S. subprime mortgages, which signaled the start of the credit crunch that snowballed into the global financial crisis, and European banks still haven’t fully recovered. (Bloomberg)

A short-term interest-rate trader explains what really happened on the day of the financial crash. (Independent)

This trader allegedly committed fraud to milk ABN Amro, Societe Generale, BNP Paribas, Natixis and Macquarie Bank of $360m – and he was caught after making a poor choice for an email subject line. (Bloomberg)

George Lucas, the creator of Star Wars, and Ray Dalio, the founder of the world’s largest hedge fund, have the same favorite book and both practice Transcendental Meditation. (Bloomberg)

Citadel made a couple of significant hires to bolster its London-based equity business. (HFMWeek)

The CEO of ADP called Pershing Square Capital’s Bill Ackman “a spoiled brat in school asking a teacher for an extension of the homework” – on live TV. (Business Insider)

Jeremy Vine, who earns £750 ($973.35k) per year as a BBC presenter, tweeted a poll question asking about the profession of the jogger who pushed a pedestrian into the path of a bus – the options were a banker and two others from the financial sector. (Daily Mail)

Photo credit: Charging Bull – New York City by Sam valadi is licensed under CC BY 2.0.

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