IFR Editor-at-large Keith Mullin
VIKRAM PANDIT’S DEPARTURE from Citigroup after just five years adds to a long list of bank chiefs or investment bank heads who have changed – or have been changed – since the global financial crisis. In fact, hardly any of the major global firms have been spared.
Mike Corbat’s perhaps rather surprising rise to the top of Citigroup follows Jamie Dimon’s July decision to move Jes Staley upstairs. JP Morgan’s former investment bank CEO was moved to the CIB chairmanship as Mike Cavanagh and Daniel Pinto were tapped to be co-CEOs of the newly-formed and expanded division and Matt Zames moved a step closer to the seat of power as group co-COO.
Of course, Bob Diamond’s ignominious resignation and Antony Jenkins’ rise to the top of Barclays is but a few weeks old.
As for the rest, just think about it. Anshu Jain and Juergen Fitschen took over as co-CEOs of Deutsche Bank this year; Sergio Ermotti was named CEO of UBS in 2011 following the Adoboli trading debacle that forced out Ossie Gruebel and others. James Gorman has only been chairman and CEO of Morgan Stanley since January 2010 following John Mack’s retirement, the same date in fact that Brian Moynihan became president and CEO of Bank of America Merrill Lynch after Ken Lewis’s retirement.
At BofA Merrill, David Darnell and Tom Montag, who are charged with the day-to-day running of the business lines, have only been co-COOs since 2011. At RBS, Stephen Hester took over as CEO in the eye of the storm in November 2008, after Fred Goodwin et al had almost forced the bank into oblivion.
That makes Brady Dougan something of a veteran, having been promoted from running the investment bank to group CEO of Credit Suisse in May 2007, just as the global financial crisis was brewing. The only major bulge-bracket firm whose top ranks have seen it through the crisis intact is Goldman Sachs, where the only change to the executive committee has been David Viniar’s decision a few weeks back to exit the CFO’s office in favour of Harvey Schwartz.
The investment banking industry and the broader banking sector are in the midst of a process of massive change
Beyond that, Lloyd Blankfein has been chairman and CEO, and Gary Cohn president and COO since June 2006. Goldman’s issues, of course, have surfaced away from its inner-circle executive committee. A veritable bus-load of senior talent has walked in the past couple of years, undoubtedly depriving the firm of its future leaders.
At some point, Blankfein is expected to split his role, retaining the chairmanship and making Cohn CEO and Mike Evans president and COO. But that’s not going to change much in the firm’s strategy or direction.
YOU’VE GOT TO wonder what all of this change means for the industry. I suppose one way of looking at it is that churn in the industry’s upper echelons is a positive development. The investment banking industry and the broader banking sector are in the midst of a process of massive change. Having new people at the helm of the industry who are able to confront the new realities without the prejudice of pre-crisis management thinking is potentially going to get us where we need to go more quickly and more smoothly.
This speaks to the rapidly evolving regulatory discourse, creating more transparency and better accountability, more realistic pay-for-performance metrics and more robust governance standards. It speaks to setting the right parameters for an investment banking business that has morphed from pre-crisis proprietary models built on trading velocity and volume to more of an agency-cum-utility function.
Finally, it also speaks to a new set of macroeconomic variables, the impact of which is unknown: slower growth to low growth to no growth, depending on the country; zero or close to zero interest rates in the US, eurozone, Japan and the UK; negative short-end bond yields in selected markets driven by safe-haven flows; a policy environment geared to government deficit-busting; massive quantitative easing by central banks. Oh, and the eurozone sovereign crisis, too.
TO BE SURE, none of the new banking or investment banking incumbents has come from outside the industry, which offers food for thought. The focus has always been on selecting individuals with knowledge of the industry, which people say is because it’s a complicated and highly regulated one.
But thinking about the criticisms levelled at the banks in recent years – beyond the well-versed issues of short-termism and greed – a lot of attention has been focused on the fact that the banks are, if not too big to manage, then too complex to manage. Just thinking out loud here, but I wonder if it’s time to bring people into the industry who have backgrounds of accredited management achievement earned away from banking.
As for the new crop of leaders, I’m a believer that bankers’ DNA is formed at a relatively early stage in their careers. Whenever I’ve mentioned senior bankers’ backgrounds as defining their outlook and approach to building or problem solving, I’ve got a lot of pushback, with people telling me that I discount more recent experience for those who have moved around the divisions.
It’s just that if you spend the bulk of your career as a retail banker, an investment banker or a trader, I reckon that defines who you are.
That doesn’t necessarily contradict the notion I articulated above that new blood offers a better way forward for the industry. It’s more a notion of nuance and comfort zones. Can a leopard change its spots? We’re about to find out as the new group of leaders enters the fray.
