We’ve all read this story before. Bankers get large chunks of their bonus paid in deferred stock or other securities and get all riled up. After all, everyone wants cash. Then, a year or two later, the security that they didn’t want to invest in is beating the market and they didn’t blow $220,000 at a strip club.
This version of the story involves contingent-capital debt, which bankers at UBS and Credit Suisse have been paid in as part of their bonuses, according to Bloomberg. The notes – known as CoCo bonds – are tied to each bank’s capital standing, meaning they incentivize a risk-averse approach. The strategy is a reversal of what banks did pre-crisis – paying bonuses mostly in cash – which inherently incentivizes risky behavior.
Anyway, these contingent-capital bonds are up 7.5% on the year, beating the broader S&P Index, which is up 5.8% year to date, along with most every bank stock.
This isn’t the first time bankers have been rewarded after seeing the cash portion of their bonus pared back. Those who were paid in deferred bank stock in the years following the crash had a wonderful 2013, if for no other reason than the movement of their deferred shares.
The value of shares of Goldman Sachs, Bank of America and Morgan Stanley nearly doubled between 2012 and 2013, for example, even while revenues remained relatively flat. Investors didn’t trust banks following the crisis, so the shares were artificially deflated. Most are now back to trading near their tangible book value.
Unintentionally earning more as a direct result of shooting yourself in the foot. That has to feel weird, in kind of an awesome way.
What’s the best day and time to submit your resume to recruiters? There isn’t one right answer, but bookending the weekends during the early morning hours appears a good strategy.
If you know a sell-side trader, there’s a decent chance they’re shopping off the discount rack. Recent comp numbers are even worse than many had thought.
Wall Street trading volumes didn’t dip during U.S. World Cup game on Thursday compared to recent days and weeks. That’s not to say traders weren’t watching the game. It more so shows how slow the market has been all summer. Sadly for traders, every day is a good day to watch TV at noon.
Barclays’ latest blunder – accusations of fraud related to its dark pool – is hurting its relationship with other broker dealers, which are taking their trading business elsewhere. It’s not good for Barclays employees, either. CEO Antony Jenkins sent a memo last week promising a swift and “severe” response.
Here’s a great explanation from Matt Levine on how the Barclays’ saga went down, including an unfortunate back-and-forth email exchange between higher-ups within the bank’s equities department. The subject line in the email could have read: “Are we lying to clients?” They decided no. Authorities disagree.
The biggest money manager in Thailand plans to double the size of its investment staff by 2015. The SSO, which manages roughly $34 billion, may also open new offices around the globe.
Students at elite schools like Harvard and Yale can now rent puppies by the hour to calm their stressed out nerves.
Buzz Around the Office
Most banks offer credit cards that can be redeemed for points or miles. Not the Canadian Imperial Bank of Commerce. It’s new credit card offers loyalty points for a doughnut chain.
Quote of the Day: “If life gives you lemonade- make lemons and life will be all like ‘whaaaaat?’” – Phil Dunphy