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Morning Coffee: Renewed appetite to hire 21-year-olds in banking. The ‘medium-sized physics department’ making billions

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Investment banks are quick to trim, but never entirely decimate, graduate recruitment when times get tough. After 2015, investment banks shaved a collective 280 jobs from their 2016 targets across their European operations. Now that Brexit means that likely fewer jobs are required in London, analyst programmes seem the obvious targets for a little caution.

And yet, investment banks are hiring the same number – if not more – graduates in 2017 than this year, according to Financial Times. At Deutsche Bank, which has frozen lateral hiring, the picture is a little fuzzy – it’s doubled tech headcount, but will bring in the same number (750) in London next year. Citi will hire 450 (the same as this year), while Barclays and J.P. Morgan have  kept their targets in line with 2015/16.

“We haven’t seen a question in the minds of businesses as to whether graduate recruitment should be impacted [by Brexit],” said Faye Woodhead, head of graduate recruitment at Deutsche Bank. “We have a three-year plan.”

If this seems gung-ho, it’s worth a reminder that banks faced a mid-rank talent shortage for years after they all heavily curtailed graduate recruitment in the two years after Lehman Brothers’ collapse. What’s more, junior hires tend to churn a lot more than those further up the tree, and – if they stick around – are being handed ever-more responsibility. This also is not a vote of confidence for London.

“Ultimately, the investment banks still want London to be their main platform from which to operate in Europe but, if the ‘divorce’ negotiations go badly it is still relatively easy to relocate individuals from London to Frankfurt/Paris/Luxembourg/Dublin if they have to,” said Andrew Breach, director of financial services at recruitment company New Street.

Separately, David Harding, CEO of quantitative hedge fund Winton Capital Management, has been talking science, investment and tax with the FT. Winton has “450 people in the company, of whom 250 are involved in research, data collection or technology”, he says. This, says the FT is “the equivalent of a medium-sized university physics department”.

Harding grudgingly accepts Winton being labelled as a hedge fund, but gets most heated when discussing the scientific approach of his firm. Efficient market theory is nonsense, he says. “It treats economics like a physical science when, in fact, it is a human or social science. Humans are prone to unpredictable behaviour, to overreaction or slumbering inaction, to mania and panic.”

He also says that the AI fad in hedge funds is nothing new: “We have used techniques that would be described as machine learning for at least 30 years,” he said.

Winton is worth around £1.3bn ($1.6bn) and claims that the directors of Winton have paid around £1bn in income tax collectively over the past nine or ten years.

Meanwhile:

Bank of England governor Mark Carney has been drawing up plans to keep the UK in the EU’s single market until 2021 (Telegraph)

Hedge fund dispute means Lehman might not be wound up until 2022 (Telegraph)

Sales are the most likely investment banking staff to move over to the EU after Brexit. After that, it gets a bit fuzzy (WSJ)

Brexit means Bank of England’s “staffing model would have to evolve – ideally to be more like that of a professional services firm” (Telegraph)

Ireland’s Central Bank is expanding its team by 25% in anticipation of insurance firms moving from the UK (Financial Times)

Plummy accent and fine wine collector Michael Spencer, CEO of ICAP, says he has a “bit of the barrow boy” in him (Sunday Times)

If Trump tears up financial regulations, the hiring frenzy for compliance staff will finally be over (NY Post)

The Square Mile is changing: tech firms are moving in (Financial Times)

Convicted Barclays Libor traders denied chance to challenge their jail sentence (Bloomberg)

“What’s clear is we’re in the middle of a revolution caused by indexing. It’s reshaping Wall Street, it’s reshaping the mutual fund industry. And it’s doing something very simple: shifting the allocation of stock market returns away from Wall Street and toward Main Street. We’re beyond the beginning, but nowhere near the end.” (Bloomberg)

400 people were evacuated from Barclays UK HQ after a chemical reaction produced chlorine gas (Bloomberg)

James Garvey has been promoted at Lloyds Banking Group to head up its trading business ahead of the UK’s plans to ring-fence investment and retail banking operations (Reuters)

Santander is abandoning its plans to split its retail and investment bank to allow it to move staff out of the UK quicker if necessary after Brexit (Financial Times)

Goldman Sachs has overtaken J.P. Morgan at the top of the financial sponsor league tables (Financial News)

Contact: pclarke@efinancialcareers.com

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