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Morning Coffee: Goldman Sachs’ Brexit contingency plan shows what’s being lost. Banker with the most impressive backstory

Goldman Sachs Brexit contingency plan

If the City of London is dismantled as the result of a nasty Brexit settlement, it won’t magically reappear somewhere else. Things that currently happen in the City will be dispersed across Europe and the Atlantic. – This is the message of the Goldman Sachs Brexit contingency plan, allegedly seen by journalists at German newspaper Handelsblatt. 

Handelsblatt claims Goldman is contemplating halving its London workforce in response to Brexit. 3,000 jobs could go at Goldman’s Fleet Street office. That’s bad – and a lot higher than any figures suggested previously. 1,000 of these jobs will reportedly be shifted to Frankfurt, where the firm is thinking of rehousing people in a new subsidiary known as, ‘Europe SE.’ This Frankfurt unit will reportedly take in regulated personnel like traders, senior managers and related compliance staff.

The other 2,000 refugees from Goldman Sachs in London will be scattered about liberally. Handelsblatt says Goldman is planning to shift back office jobs to Warsaw, where it has an established technology and operations unit. It’s planning to shift relationship managers working with clients in France and Spain to offices in those countries, and it’s planning to move ‘product innovators in trading operations’ to New York.

In other words, there will be no replacement for London post-Brexit: there will only be fragmentation and additional cost. This matters, because as we’ve pointed out before, Goldman’s London office is unusually profitable. If that profitability is lost, Goldman’s global margins could suffer.

Of course, it might not happen. Goldman Sachs denied claims that it was moving jobs to Frankfurt when they last surfaced in November. During yesterday’s results call, CFO Harvey Schwartz said the firm will continue to evaluate its options. “There’s obviously going to be a long process, but we’re contingency planners by our very nature,” said Schwartz. “We will run through different alternatives. We need to ensure that it’s not disruptive, and that there’s a long enough runway [to implement decisions]… we’re going to see how these things evolve over the next couple of years.”

If Goldman does eventually decide to spread its London operations across Europe after Brexit, it won’t be alone. Citigroup’s Brexit strategy also involves shifting front office jobs to Frankfurt, while its back office jobs will go to Dublin.

Separately, Erkin Adylov has the best back-story of anyone in finance. Bloomberg reports that Adylov grew up in a small settlement in Kyrgyzstan as the child of two farmers. He was a goatherd until, aged 16, he won a scholarship to the U.S. His parents subsequently sold their house to pay for a one-way ticket to Hawaii, where Adylov secured a scholarship at Hawai’i Pacific University. There, he worked 60 hours a week at four different jobs and still managed to graduate with a GPA of 4.0. This got him another scholarship at the London School of Economics, from which he joined Goldman Sachs in 2007 and then hedge fund GLG partners where he was a top portfolio manager earning $1m a year.

Today, Erkin has followed many of the other more talented people in finance into fintech. He runs Behavox, the compliance technology firm which uses machine learning to predict rogue traders.  “I realized that if I scrolled my life forward 20-30 years it was highly predictable,” he says. “My life has always been a chase, a perennial progression toward something better. For me, it’s all about the struggle.”

Meanwhile:

Brexit might not be that bad. What Theresa May actually said was, “The new deal with the EU “may take in elements of current single market arrangements in certain areas – on the export of cars and lorries for example, or the freedom to provide financial services across national borders – as it makes no sense to start again from scratch when Britain and the remaining member states have adhered to the same rules for so many years.” This suggests she wants passporting. The question is whether she’ll get it. (Financial News) 

Tidjane Thiam says it should be a “reasonable year” for Credit Suisse compensation. (Bloomberg)

Meanwhile, at HSBC: ““Activities specifically covered by EU legislation will move [from London to Paris], and looking at our own numbers, that’s about 20 percent of revenue.” (Bloomberg) 

Henrik Gobel has taken sole control of Morgan Stanley’s global capital markets business in Europe. His predecessor is becoming head of a new structured credit solutions team in Morgan Stanley Investment Management. (Financial News)

In America, 49% of postings in the quartile of occupations with the highest pay are for jobs that frequently ask for coding skills. (Economist)

A short guide to time series analyses. (KD Nuggets)

The archetypal M&A client: “I love good wine and good food. I eat just once a day, at dinner, because I don’t conceive of a meal without a good bottle of wine, and I couldn’t drink during the day.” (Financial Times) 

Cambridge University is hiring a professor of Lego. (BBC)


Contact: sbutcher@efinancialcareers.com

Photo credit: The circle of life by Shawn Harquail is licensed under CC BY 2.0.

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