As bonus time approaches at the Royal Bank of Scotland, politicians in the UK are becoming increasingly vocal with regards to the bank's alleged £250m ($397m) bonus pool. The latest to opine on the subject is Sir Nigel Lawson, former chancellor of the exchequer under Margaret Thatcher. Lawson tells the Financial Times today that RBS's 'star traders' are overrated and don't deserve to be paid any bonus at all.
“These are not particularly impressive individuals,” Lawson said. “They’re all of them easily replaced, particularly in today’s labour market.”
Is this true? All the headhunters we spoke to begged to disagree.
"There are some great traders still at RBS," said one headhunter who declined to comment on the record. "A lot of their people have been there for a long time and have been very well rewarded. They are loyal to the bank through thick and thin."
RBS's strengths are in rates and FX. Headhunters said its FX and rates desks are staffed by long-serving senior traders who form the backbone of the investment bank. In the third quarter of 2012, revenues in RBS's markets business totalled £1.2bn, of which 47% came from the rates and FX businesses combined. A further 37% of third quarter revenues came from RBS's asset backed securities business.
RBS's long serving top traders include the likes of:
David Halstead, a sterling swaps trader who's been at the bank since at least 2004 and joined when it was still Natwest.
Simon Wilson, global head of EMEA algorithmic rates trading and deputy head of EMEA Delta Trading. Joined from Goldman Sachs in 2004.
Philip Hinder, head of rates trading for EMEA and APAC. Joined from Bank of America in 2002. (Gerrard Barrett, Hinder's former co-head of rates trading was said to be taking a sabbatical for a year in April, but the FCA Register shows that he left the bank in June.
Alan King, managing director in rates trading who's been with RBS since at least 2002, and joined from Greenwich NatWest.
Beyond the trading desks, other highly valued individuals at RBS include: Michael Lyublinsky, head of the investment bank in the US; Scott Eichel, head of securitized products and credit in the US; Peter Nielson, chief executive officer of the markets business (tipped to succeed John Hourican as head of the investment bank); and Brian Reid, head of the research and strategy group. Last year, Lyublinsky, Eichel, Rading, Nielson and Reid were said to share a £30m bonus pot.
"There's been very little change in the people working in core roles at RBS," said another headhunter, speaking on condition of anonymity because he works with RBS. "These people are very good. Some of them have earned very good money out of RBS - before 2008 they were often paid 100% cash bonuses, no deferred."
Not all RBS's star traders have remained loyal to the bank. Most notably, Steve Ashley left for Nomura in 2010. Ashley then poached a raft of his former RBS colleagues, including Gary Cottle, Jon Linton, Pierre Fourmet and James Duncan.
RBS didn't return a request to comment for this article. But after Ashley left, headhunters say Nomura's rates business was stabilized by Jezri Mohideen, a senior rates trader who joined RBS from Barclays in 2006. Mohideen was made head of rates for RBS in Europe and Asia Pacific in 2010. Unfortunately, however, Mohideen was put on leave from RBS in October 2012 after it was alleged that he manipulated Libor rates whilst working for RBS in Singapore in 2007.
Mohideen's suspension has arguably left RBS's key rates franchise leaderless and vulnerable to poaching from rival firms - making it all the more necessary that its people are rewarded this year. Following Mohideen's suspension, headhunters say Philip Hinder, a rates trader who joined RBS from Bank of America to run the exotic rates business in 2006, has effectively begun managing the rates trading business. RBS was unable to confirm this.
If RBS's rates traders want to leave, there may be demand for them. Christian Robbins of Cherry Bull, a financial markets search firm, said hiring has picked up in rates and FX this year. "Headcount seems to have stabilized and there are bids out there in the market, particularly among smaller banks." As we noted yesterday, many of UBS's fixed income bankers have found new roles, with banks like Mizuho taking the opportunity to pick people up.
Evidence suggests that RBS salespeople and traders are employable elsewhere. Last September, the bank lost two senior bankers in the US. In July, its Hong Kong-based global head of structured equity derivatives went to UBS. Hedge fund Brevan Howard has also picked up rates traders from RBS's Connecticut business in the past.
RBS's star traders may prove less replaceable than Nigel Lawson thinks. They may also still have the option of leaving if the RBS bonus pool is reduced to zero. "Some of these guys are excellent traders. They could move to hedge funds if they liked," said one headhunter.