Late Lunchtime Links: More cuts coming at Citi, 90% cost ratio at BarCap, it’s all going well now at BofA

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Alleged employees at BarCap

It’s been a day of differing portents.

On one hand, Citigroup has intimated that it might need to make more redundancies in its investment bank. Yesterday, Citi CFO John Gerspach made an investor presentation in which he confessed that:

"While we are strategically committed to securities and banking, we are not oblivious to the fact that our cost structure cannot be justified by our current revenues."

Reuters points out that there’s already been a “big round of redundancies” at Citigroup, with advisory, fixed income and equities staff all laid off in December. Citi’s EMEA business did quite well last year, but its redundancy figures keep rising. In November, Pandit said there would be just 900 redundancies in the investment bank; a few weeks’ later this was increased to 4,500 across the company.

Another place which might benefit from a few more redundancies is Barclays Capital. As we noted a few weeks ago, costs at BarCap are considerably above target. Now, analysts at Exane BNP Paribas have reached the same conclusion. In the fourth quarter of 2011, they think the cost revenue ratio at BarCap reached 89%, up from 67% one year earlier and considerably higher than Bob Diamond’s target of 60-65%.

Worse, and as shown by the graph below, Exane’s analysts are predicting very bad things for BarCap’s RoTE. They don’t advocate redundancies per se, but they do point out that if BarCap were ‘restructured’, it might lift the value of Barclays as a whole by one third.

Finally, the good news: everything’s going fine over at Bank of America Merrill Lynch. As we mentioned last week, BAML’s sales and trading business appears to have recovered from the horrors of Q3 2011.

Now, Tom Montag is letting it be known that this bad stuff is in the past. “I think we’ve gotten through the worst of it, and I think this firm, and the market by the way is telling us this, that this place has incredible potential. From this point forward, it’s a new game,” he told Bloomberg, whilst also pointing out that BAML takes a lot less risk than JPMorgan or Goldman.


Bonuses at BAML will probably be down 25%. (Bloomberg)

Morgan Stanley has named 210 managing directors, down 232 last year and the fewest since 2008. Only 17% are women. (Business Insider) 

David Cameron has insisted that Stephen Hester’s bonus is not larger than £1m. Last year Stephen got £2m. (Financial Times)

RBS's remuneration committee is meeting tomorrow. (BBC) 

Investment bankers, like lap dancers, should have to pay to go to work.(City AM)

It helps to make eye contact. (Medical Express)