Morning coffee: Goldman Sachs restructuring could hurt traders’ bonuses. Deutsche Bank MD sacrificed her salary and was cut in the same way

Goldman Sachs deserves full credit for confidentiality. Everyone knows that Credit Suisse is planning to announce a major restructuring at the end of this month, but who knew Goldman Sachs was preparing its own restructuring? Nobody, until the Wall Street Journal broke the news late last night.

Admittedly, Goldman is less dramatic. While Credit Suisse is planning changes that could lead to 6,000 job cuts and the sale of the securitization business and some Swiss assets, Goldman’s intentions are more moderate. It simply intends to organize its organization into three divisions: Investment Banking and Trading, Asset and Wealth Management, and Transaction Banking. This compares to the four segments the company currently has: Investment Banking, Global Markets, Asset Management, and Consumer and Wealth Management.

Unlike Credit Suisse, Goldman’s reorganization is not explicitly linked to job cuts, and can simply be seen as a change in internal nomenclature. It is conceivable, however, that the cuts will come as a result: merging departments is a good familiar route to “efficiencies” and can reduce the need for two sets of employees in some support functions. It can also lead to changes at the top: smaller department heads who are not appointed as heads of larger departments are subject to sudden retirement.

Mostly, though, Goldman’s changes look like bad news for anyone in Marcus’ consumer banking sector, which was suddenly included by its much larger asset and wealth management division after incurring $4 billion in cumulative losses. On the contrary, this sounds good news for anyone in the transaction banking business, TxB, which has been given an entire division of its own. In investment banking and global markets, the changes made by Goldman Sachs seem less significant on the surface, but could have a real impact. And they’ll underscore how much – despite all attempts at diversification – Goldman remains an investment bank: Global Banking and Markets generated 78% of the company’s revenue in the second quarter.

Goldman’s merger of global markets and investment banking could weaken the internal impact of the smaller investment banking business at a time when revenues are declining and the bonus pool for 2022 is finalized. Currently, Jim Esposito and Dan Dess head the investment banking segment, while Ashok Global Markets Varadan and Mark Nachman. Nachmann is already moving into the new asset and wealth management division, and one of them is likely to move from Dees or Esposito as well. Goldman Sachs will report its third-quarter results tomorrow, and in line with other banks, revenue in its investment banking division is likely to have slipped. Changes can leave the investment bank more vulnerable to cutbacks and trim heavy bonuses. Similarly, though, it can be argued that fixed income traders who have done well this year will now be more obligated to provide mutual support to their fellow investment banks grouped into one division. Fixed income traders who thought they would get big bonuses as part of a stand-alone business in global markets can find their bonuses much lower now that they are in bed with poorly performing investment bankers.

Separately, if the bank is cutting costs and really wants to get rid of you, the unfortunate story of Elisabeth Mujars of Deutsche Bank suggests that giving up some wages won’t make much difference.

Maugars, who was a medical doctor, is suing Deutsche Bank for sex and age discrimination. Bloomberg reports that DB let it go during a cost-cutting round in early 2020 even though it just gave up a month’s wages in an effort to help the bank save costs. She was 57 years old at the time. The Maugars allege that colleagues at Deutsche also called her Christine Lagarde in reference to her French nationality and white hair.

while…

James Gorman of Morgan Stanley says the bank is looking at headcount. “Obviously we are looking at headcount… you have to take into account the rate of growth we have seen in the last few years and we have learned a few things during Covid about how we can operate more efficiently. That is something the management team is working on between now and the end of the year” . (financial news)

Citi still employs bankers. “We continue to invest in building our teams for long-term growth opportunities, including in healthcare, technology and energy,” said Jane Fraser, CEO of Citigroup. “And I am really happy with the high caliber bankers who are drawn to our platform and culture.” (Reuters)

Jamie Dimon says JPMorgan won’t wait until next year to hire and that the bank is still spending in line with its Investor Day commitments. (interested in trade)

KPMG has promoted 108 new partners but they will not share the profits. (times)

The UK’s Financial Conduct Authority (FCA) wants 15 people to work for it Wholesale crypto policy unit, including senior administrators and junior data analysts in digital assets. (financial news)

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