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Morning Coffee: The European bank that got burned for emulating Wall Street. The U.S. IBD hiring City bankers despite Brexit

European investment banking, investment banking, investment bankers, investment banks, Deutsche Bank, Raymond James

The financial district in Frankfurt, Germany

Let this be a warning to parochial European banks with aspirations to join what was once known as the U.S. ‘bulge bracket.’ – Don’t. Deutsche Bank tried, and is suffering the consequences.

Handelsblatt has written a history of Deutsche Bank which outlines its undoing. The German paper’s English edition recalls how, back in the 1970s, Germany’s largest financial organization strayed from its domestic roots and made a play for a piece of Wall Street action. Deutsche wanted in on the derivatives market.  It expanded into London in 1976 and New York in ’79. Two decades later, it agreed to buy scandal-tarnished Bankers Trust.

In the process, Deutsche’s formerly conservative German bankers learned to love the high life of Wall Street. None was more dazzled than ex-Deutsche CEO Josef Ackermann, a flamboyant Swiss banker infamous for an outrageous promise that the bank would make a 25% return on investment and for flashing a Nixonian victory sign at the start of Germany’s biggest-ever corporate trial.

Even after the 2008 financial crisis, Deutsche’s excesses continued, with sins that have only recently come back to haunt it. In the past five years, Handelsblatt calculates that Deutsche has agreed to pay nearly $16.65bn (€15bn) in fines and settlements for legal wrongdoing, including a $2.5bn fine for manipulating Libor and $7.2n for pushing mortgage-backed securities. Before reaching those settlements, the bank was repeatedly accused of not cooperating with authorities, and Deutsche’s traders in London and Moscow allegedly still continued a Russian money-laundering scheme up until 2014.

Now, Reuters reports that Deutsche Bank chairman Paul Achleitner has announced that he expects former board members to contribute substantial sums of money toward the costs of its past misconduct as Germany’s biggest lender seeks to rebuild its reputation.

After Deutsche Bank fell out of the top five in a ranking of global investment banks last year, British-born, German-speaking former consultant John Cryan, the current CEO, now wants to make a clean break with the bank’s Wall Street mentality and take it back to its German roots. The odds are that the bank’s next chief executive will be a conservative German, either Christian Sewing or Marcus Schenck, who were named co-presidents in March.

“The German faction has won a battle,” Dieter Hein, a banking analyst at Fairesearch, told Handelsblatt.

Auf Wiedersehen, Wall Street.

Separately, while many European banks are making plans to move headcount out of London after Brexit, some American financial services firms are actually moving people to the City.

U.S. firm Raymond James – best known as a broker-dealer with a vast network of financial advisers – is opening a new office in London and hiring investment bankers there. The Florida-based firm is searching for office space ahead of a planned ribbon-cutting in September. It has already recruited senior dealmakers from Deloitte, Investec and bulge-bracket banks in the City to form a 15-person team that will grow over time to 30 executives.

Melville Mummert, the head of European investment banking at Raymond James, told Financial News that Ray J chose London as the destination for a new M&A advisory outpost because the firm holds a “deep belief” that the City will retain its status as the financial center of Europe.

To make sure its bases are covered, however, Raymond James is also opening a new office in Frankfurt in June.

Meanwhile:

Goldman CEO Lloyd Blankfein defended his firm’s compensation but conceded that succession is “the hardest thing we have to do,” alluding to the president/COO role vacated by Gary Cohn as “the back-up quarterback [who] would be the number-two quarterback in the league”. (Thunderbird School of Global Management)

The Trump administration took the idea of breaking up big banks off the table as Treasury Secretary Steven Mnuchin told a congressional panel that isn’t what he has in mind in reviewing the line between commercial- and investment-banking activities. (WSJ)

President Trump has selected a candidate to be permanent head of a key Wall Street regulator, but Mnuchin isn’t saying who. (Bloomberg)

Mnuchin is directing regulators to review the Volcker Rule’s effectiveness, which has banks hoping that they’ll get relief from the regulation. (Bloomberg)

Most of the financial elite attending the SALT conference seemed unperturbed by Trump’s succession of scandals, with some saying they’d be comfortable with Mike Pence leading if it comes to that. (Bloomberg)

Japanese bank Mizuho hired Massimo Tassan-Solet, a former Goldman Sachs and Deutsche Bank executive, as head of derivatives trading. (Business Insider)

Augmented trading using machine learning or AI will become the new normal, says Alphabet’s CEO. (HFMWeek)

Hedge fund Marathon is predicting another financial crisis, so it’s looking to hire distressed investment specialists. (HFMWeek)

Same for Elliott Management. (FT)

A former investment banker has launched a startup that lets app users book upscale campsites on private land, the latest incarnation of “glamping.” (Business Insider)

Odd contraptions of bygone workplaces: The isolating helmet. (BBC) 

Photo credit: Meinzahn/GettyImages

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