The Swiss National Bank’s decision to remove the ceiling on the Swiss franc could spur another round of cost cutting at major Swiss banks.
Speaking yesterday at Davos, UBS chairman Axel Weber said the currency shock could cause significant volatility in global markets in 2015 and that UBS’s growth prospects had been reduced as a result. At the same time, Credit Suisse issued a management statement warning that the swing in the Swiss currency could impact profits, unless ‘offsetting management actions’ are taken. Credit Suisse is already in the middle of a $200m per annum cost-cutting programme and UBS has set itself a return on equity target of 15% by 2016. Analysts are already warning that ‘Swiss bank earnings will be significantly lower’ if they have costs overseas but use the Swiss franc as a reporting currency. Both banks may therefore need to cut costs further to defend their profitability - although cuts may come in Swiss head offices rather than among investment staff in London and New York.
Separately, Damon Buffini is retiring from private equity fund Permira aged 52. Buffini should be a source of reassurance for anyone who thinks the finance industry is only open to students from wealthy backgrounds. The Financial Times reports that Buffini grew up on a council estate in Leicester, the child of a single mother. From there, he went to St. John's College Cambridge to study law before finding work with with LEK Consulting (a management consulting firm), achieving an MBA from Harvard and joining Schroders Venture UK. Schroders later became Permira and Buffini spent 12 years in charge, first as managing partner and then as chairman.
UBS’s new 6,000 person building at Broadgate in the City of London will have three trading floors, a 250-seat auditorium, external terraces, a gym, a staff restaurant and more than 500 bicycle spaces. (Bloomberg)
Morgan Stanley just made 151 people managing directors. Only eight were in Europe, but that was twice as many as last year. (Financial News)
When a one-off tax gain and a $1.1bn charge are stripped out of Morgan Stanley’s fourth quarter results, the bank made an annualized return on equity of 4.8%. That’s a long way below its 10% target. (Breaking Views)
Morgan Stanleys FICC revenues are now less than half their level of 2006. (Bloomberg)
Morgan Stanley's FICC revenues fell 14% year-on-year in the fourth quarter. This compared to a 14% decline at J.P. Morgan, a 16% decline at Citigroup, a 21% decline at Bank of America Merrill Lynch and a 30% decline at Goldman Sachs. (Financial News)
Goldman Sachs actually achieved higher equities trading revenues than Morgan Stanley in the fourth quarter. (Wall Street Journal)
Goldman Sachs thinks commodities trading is a source of revenues for the bank as a whole: CFO Harvey Schwartz says commodities hedging is a critical service for customers, and a good way to win underwriting and merger advisory business. (Reuters)
Goldman Sachs denies accusations of inappropriate client entertaining, says it spent no more than $100 per head on meals out with members of the Libyan Investment Authority. (Evening Standard)
Commerzbank announced a cost-cutting plan in 2013. Since, then a lawyer for an ex-member of the management board claims that not one single person has been laid off due to restructuring. (Bloomberg)
Jefferies is looking for a new HQ in London. (Bloomberg)
Who do you know who’s at Davos? (Quartz)