A worrisome new fact has emerged about UBS’s redundancies: in some cases they involved the replacement of highly paid human beings with machines.
Bloomberg has elicited this information. It cites the example of David Gallers, the former head of credit-default swaps index trading at UBS whose job it says has been eradicated to make way for a computer algorithm. This algorithm can trade, ‘as much as $250 million of the Markit CDX North America Investment Grade index and $50 million on the speculative-grade benchmark in one transaction.’
Building a computer algorithm costs a ‘few hundred thousand’ dollars, says Bloomberg, and the algorithm runs for years – with some tweaking. No one knows how much Gallers himself was earning, but six years’ ago it seems an MD in credit derivatives could command $2m a year. Credit derivatives traders will be earning a lot less today, but if they are to compete with far more efficient algorithms, it appears that anything above $100k will be excessive.
Separately, BNP Paribas’s results are out and there’s excitement over the fact that it’s completely finished deleveraging. BNP has also made 90% of its investment banking redundancies and its investment banking revenues were up 41% in the third quarter. However, it is not all good. Once the most efficient investment bank of the lot, the chart below shows that BNP is now less efficient than Bank of America, Barclays or JPMorgan (although it looks pretty good in comparison to UBS). It’s also worth noting that profits at BNP’s investment bank fell 27% in the first nine months of 2012 vs. the same period of 2011. Bonuses at the French bank are very unlikely to be good this year.
For Morgan Stanley to get close to hitting its return-on-equity targets, a Goldman analyst estimates that it would need increase its return on assets to 0.7%. Last year its ROA was around 0.38%. (Dealbook)
Morgan Stanley lost money on eight trading days in the third quarter, down from 31 days in 3Q2011. (Bloomberg)
15 of the 33 partners who’ve left Goldman Sachs in the past year are working somewhere else. Maybe it’s not retirement money after all. (Financial News)
30 partners at Goldman Sachs have cashed in options worth $22m. (WSJ)
ING is cutting 2,350 jobs – mostly from insurance. (Reuters)
Stephane Rambosson at Veni Partners says: “One of the biggest problems is that the ratio between front and back office has exploded. In some areas it is at one-to-three or even one-to-four. These are huge fixed costs and it will need to change.” (Financial Times)
Ray Kahn, head of OTC clearing at Barclays, said: “The amount we are clearing at the moment is probably a tenth or less of what we expect to see in the future under mandatory clearing.” (Financial Times)
A 35 year old hedge fund and boutique investment bank is going into administration. (Bloomberg)
Ex-directors at Allied Irish Banks are being asked for forego part of their pensions for moral reasons. (Financial Times)
A lot of people, including Yonatan Gozdanker, London-based global head of equities, are leaving Renaissance capital. (Bloomberg)
New York-based BTIG, a broker-dealing catering to the alternatives space, has hired former Deutsche Bank trader Eddie Benson to help run its expanding European operations. (FinAlternatives)
“Interest in traditional investment banking roles has leveled off at Cambridge,” said Gordon Chesterman, director of Cambridge University Careers Service. (Financial Times)