Morning Coffee: BofA CEO acknowledges strategic mistake. KPMG’s harsh new policy

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Bank of America MDs

Perhaps the biggest drama surrounding Bank of America this year has concerned its investment bank, particularly in M&A. Reports began surfacing early in the summer that investment bankers had grown frustrated with the firm’s perceived shrinking appetite for risk-taking. The alleged internal squabbling about the bank’s conservative approach coincided with BofA’s precipitous fall down the M&A league tables and the resignation of investment banking chief Christian Meissner, among other defections.

While discussing the firm’s investment banking strategy on Thursday, CEO Brian Moynihan acknowledged that some deals may have been left on the table, though likely not in the way some of his critics would have hoped. “What we figured out is we wanted to be careful in client selection around the world, [but] we forgot in the United States we need to cover every client,” he told Bloomberg. “That’s the expansion that we probably got a bit too careful on.”

The comments are interesting because much of the reported internal grumbling was about ignoring opportunities in overseas markets. Moynihan appeared to stand behind that strategy, instead pointing the blame on a lack of in-depth domestic coverage. “We lost some share in mid-size client M&A deals in the United States. We shouldn’t do that – and the team saw that, and that’s what they’re after,” he said.

What remains unclear is who dropped the ball. Was it an issue with top-down strategy or were investment bankers chasing their tails overseas on their own volition, only to find the bank had little interest in emerging market deals? Either way, the disconnect seems to be remedied. “We switched leadership to start to drive the business deeper in the U.S.,” Moynihan said. Bank of America is actively hiring new investment bankers with a focus on the middle-market, he added. Fresh blood is certainly one way to make sure everyone is on the same page.

Elsewhere, KPMG has instituted a new policy that many employees feel is rather draconian. The firm told its U.K. employees that they will be fined £100 if they are late in submitting their time sheets. Some angered staff told the FT they feel as if they’re being treated like children by an overbearing parent. KPMG won’t be keeping the fines – they’ll come out of individual bonuses, leaving more of the pool for punctual staff – but that hasn’t appeared to palliate the irritation in the firm’s large consulting team.

Meanwhile:

European regulators suspect Deutsche Bank, Credit Suisse, Credit Agricole and one other major bank colluded to manipulate the government-backed bond market. The European Commission didn’t name the banks, but the three aforementioned firms acknowledged they were among the four. The banks now have a chance to respond before any potential fines are levied. (WSJ)

UBS Chairman Axel Weber reportedly prefers an outside candidate to eventually replace CEO Sergio Ermotti. The Swiss bank is said to be ramping up its succession planning, though Ermotti could remain in the role for another two years. (Bloomberg)

The six big U.S. banks are on pace to book a combined $119 billion in profit, easily surpassing the 2016 record of $93 billion. But bankers are reportedly not all that jolly as they break away for the holidays. Frustration over their bank’s spiraling stock price is said to be a major factor, as is the realization that another round of corporate tax cuts that buoyed the industry this year isn’t on the horizon. (Bloomberg)

Global M&A revenue has already hit a 10-year high. Numbers are actually down from last year in the U.S. but London bankers have picked up the slack. (Financial News)

Citi has told its hedge fund clients that it is tightening its prime brokerage services and overhauling management after it lost $180m when one Asian client’s emerging-markets bets went south. (FT)

Former Deutsche Bank executive Stuart Bray has been accused by a U.K. judge of using his tiger conservation charity to hide funds during his long-running divorce case. The judge also accused Bray of making "childish and facetious" comments during the hearings. Bray said (jokingly, we assume) that he "might be able to make money as a drug dealer" due to his expertise in chemistry. (Bloomberg)

In a statement announcing a $15 million fine related to Barclays CEO Jes Staley’s attempt to unmask a whistleblower, New York regulators released another previously unreported allegation – then deleted it three hours later. The New York Department of Financial Services originally said that the whistleblower also alleged Staley was removed from management at his former employer, J.P. Morgan, because he offered preferential treatment to executive Tim Main, who was a personal friend. Main, who eventually joined Staley at Barclays, was the target of the anonymous Barclays complaint that sent Staley on the hunt for the whistleblower. (Bloomberg)

A London banker who was last contracting for TD Bank has been found guilty of murdering an escort. Zahid Naseem is said to have struck the victim 13 times on the back of the head with the large black ceramic kitchen utensil. (The Independent)

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