Morning Coffee: A rather mysterious exit at Deutsche Bank, and the risks of an interim promotion

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Morning Coffee: A rather mysterious exit at Deutsche Bank, and the risks of an interim promotion

Some C-suite personnel moves are easy to interpret, some less so.  The news being reported in the WSJ that Kate Clifford, the COO of Deutsche Bank U.S.A. has left the company is a real puzzle.  It could either be very good news, very bad news, or just a droll fact of life.

The role is something of a hot seat, as you can guess from the fact that Ms Clifford’s LinkedIn profile records an extra title – “Head of US Regulatory Relations and Transformation”.  Deutsche Bank’s U.S. regulatory relations have been pretty bad recently, and transforming them is pretty much key to the strategy of the whole bank.  Ms Clifford has been in the job for just over a year, and at Deutsche for four years, having previously worked as an MD in Bank of America’s “Enterprise Capital Management” team, doing a similar job with somewhat less pressure.  So why go now?

The answer to that question – and what it means for Deutsche – depends very much on whether it’s got anything to do with the 2019 stress tests.  Deutsche Bank’s submission would have had to have been delivered at the start of April, and the results will be published before the end of June, so this news comes just during the period of uncertainty.  The group’s regulators back home are known to be worried about the U.S. outcome. 

The problem isn’t the amount of capital, which was judged to be fine last year.  It’s the notorious swamp of Deutsche’s global risk management and reporting IT systems, into which the careers of several group CFOs and three regional CEOs have already sunk without trace.  Last year, the Fed was dissatisfied with progress on improving them and consequently gave Deutsche a “qualitative fail”.  This year, things were meant to be getting better, but nobody knows for sure.

So, does Kate Clifford know or suspect something about the stress test results that we don’t?  Is this another career claimed by the Deutsche IT swamp, or a confident “my work is done here” before moving on to solve problems somewhere else? We may be overthinking things but the stakes are quite high – failing once more would be a serious blow to credibility, while passing (and thus getting the Fed seal of approval on the transformation project) would be a major positive surprise.  Deutsche is currently not commenting on the WSJ story, but one way or the other, we’ll find out in a few weeks whether her time at the bank ended in triumph or not.

Whatever the state of its regulatory relations, DB U.S.A still has a problem of profitability, and there’s no guarantee whatsoever that passing the stress test would be enough to save it from the big cuts that many are calling for.  The WSJ mention in passing that Ms Clifford’s boss, the regional CEO Tom Patrick, has been talking about leaving for the last few months.  It can be said with greater certainty that the overall level of uncertainty is clearly damaging the investment banking franchise, and the sooner it’s resolved the better for everyone.

Elsewhere, another mini-mystery at another firm – has Stephen Dainton got the top job in Barclays trading operations or not?  Back in April, when Tim Throsby left Barclays, Dainton was made “interim head of global markets”, reporting directly to Jes Staley and with his former co-heads reporting to him.  Now, as rumoured, Fater Belbachir has joined from JP Morgan to take his old job (global head of equities).  But in the press release which quotes Mr Dainton welcoming Belbachir, he’s still referred to as the “Head of Markets (Interim)”.  What gives?

With Belbachir arriving, Dainton clearly can’t go back to head of equities now, and although there might be a different vacancy at his previous rank (if the leaked memo about Guy Saidenberg is to be believed), that doesn’t seem very likely either.  Nor is he at the stage of his career where he might reasonably be moved to a business development or regional CEO post; if Barclays want to keep him, they’ll need to give him real power and budget.

Of course, it’s possible that Jes Staley doesn’t want to be seen as tying the hands of Throsby’s eventual replacement.  Barclays will need to have a head of investment banking in the near future, and whoever that is may want to make their own decisions about the Global Markets management structure (particularly since a lot of internal capital management functions got moved to Dainton’s supervision after Art Mbafeno left).  But “facts on the ground” tend to matter a lot in the investment banking game of thrones; our guess would be that if you’re in markets at Barclays, you’d better learn to like Stephen Dainton because he’s probably going to be made permanent head.

Meanwhile…

PwC plans to split its audit practice in two, and hire 500 new staff. (Financial Times)

The rise of populism and political uncertainty in general has created opportunities for policy wonks to earn money from hedge funds by trying to explain to them what on earth is going on. Perhaps this has the advantage, in career terms, that it will be a few more years before anyone will program an algorithm that understands politics. (Bloomberg)

Goldman Sachs is recruiting at job fairs in shopping centres (for call centre staff for Marcus, naturally) (Financial News)

What would be the case for merging Credit Suisse with UBS?  A Swiss finance professor writes.  On paper, it would have all the synergies of merging Manchester United with Manchester City.  In real life … perhaps all the problems of merging City with United. (Finews)

Citadel Securities has hired Silicon Valley legend Stuart Feldman.  In general, it seems that, although it’s at a disadvantage in hiring young millennial techies, when Wall Street really opens its wallet for top-level hires, it’s more than capable of attracting people away from the big tech names (Forbes)

More news of prime brokerage firms persuading buy-side clients to outsource their trading desks (Bloomberg)

After winning a charity auction for a minor part in a TV series, this UBS banker was bitten by the acting bug, and now he’s appearing in movies with Robert de Niro (Worth)

Ireland is expecting so many banks to move to Dublin after Brexit that its current regulations on bonus payments at the bailed-out domestic firms are not going to be sustainable (Bloomberg)

Just to make you feel uneasy all day – a tiny wifi camera was found stuck under the toilet seat in a branch of Starbucks (Michigan Live)

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