At this stage of the year, anything that implies lower profitability is not great. It's unfortunate, therefore, that Deutsche Bank has chosen today to declare a restructuring programme which could impact the profitability of its corporate and investment bank.
Deutsche hasn't been explicit about the impact of restructuring on the investment bank's profitability. On one hand, the change could be advantageous: Deutsche plans to reallocate €83m of costs from the corporate banking and securities business to the transaction banking business. Compensation costs and net profits were roughly equivalent in Deutsche's corporate and investment bank during the first nine months of this year. Therefore, if net profits are being boosted by €83m, optimists might think that pay at the corporate and investment bank will rise by the same amount.
On the other hand, however, Deutsche has also announced that it's shifting its passive fund management businesses (including ETFs) out of the investment bank and into the asset management unit. These businesses generated €703m in revenues and €303m in net profits last year. This makes them substantially more profitable than the rest of Deutsche's corporate and investment banking business, where the margin was a mere 27% for the first nine months of 2012. Pessimists might think that this will be bad for bonuses elsewhere in the investment bank, which won't be cross-subsidised by these businesses in future.
Separately, we have good news for some of the non-EU MBA and PhD students in the UK who would like to work in investment banking but had fallen foul of the removal of the post-study work visa: UK home secretary Theresa May has announced both a new visa stream of 1,000 places for MBA students who want to stay in the UK after graduating, and has said that PhD students will have the option of remaining in the UK for 12 months after their studies finish before they find a job. There was no mention of new visas for graduates from financial masters courses, however.
Lloyd Blankfein says it’s almost 100% certain that his replacement already works at Goldman Sachs. (Bloomberg)
Lloyd Blankfein says people are too complacent about low interest rates, but that Goldman is advising its clients to borrow as much as they need. (CNBC)
Robert Peston on how the Eurozone’s new supervision of banks will affect the City. (BBC)
Barclays has hired to run its compliance function the man who will always be remembered for being asleep at the wheel at the time of regulation’s most Titanic failings. (Telegraph)
Less than 10% of Indian MBA graduates are employable. (WSJ)
In defence of bonuses. (NY Mag)
‘Very cool’ for bankers to be seen in reindeer jumpers. (Bloomberg)