Morning Coffee: Morgan Stanley bankers’ post-bonus shock. The nice guy banker who irritated his colleagues

It’s never a nice time to get bad news.  But if you’re in the bonus pool of a major investment bank, some times are distinctly better than others.                  Specifically, if something is going to happen to your employer’s share price, it is best for it to happen in January, after the equity-linked compensation is decided but before it’s converted into a specific number of shares ( this usually occurs either on the announcement date or the day on which cash bonuses are paid).

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Morgan Stanley bankers, therefore, are likely to be cursing their luck.  Their bonuses were announced in January and would typically have been paid last week.  That would have given them a few scant days to enjoy feeling wealthy, before the bank's share price fell yesterday.

It could have been worse. The Financial Times notes that Morgan Stanley shares were down 2.4%, while Raymond James' shares were down over 8%. The decline was part of a sell-off in wealth management stocks. This appears to have been driven by the effect of a fintech company announcing the launch of an AI-based financial planning tool that appears to replicate a lot of the services provided by wealth managers and by ETrade (owned by Morgan Stanley).

Of course, the best advice that anyone – even an LLM based robo-advisor – will give you is not to look at the value of your equities on a daily basis, as the short term volatility will at best cause needless stress and at worst push you into making bad decisions.  It’s true that $100,000 of Morgan Stanley stock a week ago is worth $96,000 now. But $100,000 of Morgan Stanley stock from a year ago is now worth $130k, and long term equity grants from five years ago have more than doubled during their vesting period. 

And the actual outlook for Morgan Stanley is not bad at all.  Early indications suggest that revenue momentum is still strong, the financial sponsors may be coming back and Michael Grimes has returned from public service to start pitching for some massive IPOs.  Even the competition from AI is not as big a deal for the bank's wealth management arm as it is for Schwab or Raymond James; Morgan Stanley has always been positioned at the higher end of the wirehouse brokerage market, where there is a little more bespoke advice, a bit more personal service and quite a bit more for clients to lose if they accidentally do something dumb because of a chatbot hallucination.

Nevertheless, this is probably the shape of things to come.  As well as eating into financial jobs, AI is likely to start commodifying formerly lucrative services, with consequent effect on share prices. Perhaps it’s not only Morgan Stanley bankers who ought to be looking at this week’s news with a bit of trepidation.

Elsewhere, “doing a good job” and “being a nice guy who everyone likes” are usually the sort of characteristics you want to see in a colleague.  Unless, of course, that colleague is one step above you on the promotion ladder.  Then, it can get irritating.

Standard Chartered's disappearing CFO Diego De Georgi was seemingly frustrated into leaving by the perennially popular and well regarded Bill Winters at Standard Chartered, whose avuncular charm, steadfast avoidance of scandal and ability to weather difficult conditions in Asian markets had already caused Simon Cooper to lose hope in 2024.  Winters reportedly told the bank's board that he “intends to stay on for longer than previously expected”, and their favourable response to this news seems to have persuaded De Georgi that if he wasn’t going to get the top job, he might as well play second fiddle in the considerably more lucrative orchestra at Apollo.

It’s in many ways a nice problem for the Standard Chartered board to have, but it will become a problem over time.  The bank's share price fell 5% on the announcement of De Georgi’s departure.  That might be because analysts tend to assume that CFOs don’t leave two weeks before a set of results if they’re going to be good news, but it’s also going to reflect the fact that the bank now has a succession management problem.  It’s hard to recruit top talent into a job where the promotion path is closed off, and Winters has yet to master the Jamie Dimon trick of keeping people hanging around for “five more years”.

Meanwhile …

After several years and a compliance near-miss in 2021, McKinsey has finally decided that running a $20billion private hedge fund for its partners doesn’t have quite as many synergies with management consulting as it had hoped. (Bloomberg)

Investors are beginning to get suspicious of tech valuations, and more interested in looking at “AI-immune” sectors.  Which means that the food, utilities and mining analysts are finally beginning to get a bit of airtime with clients. (FT)

“In the context of the profound and demanding transformation of our company, we are paying particular attention to this”.  Slavomir Krupa at SocGen is dealing with an employee survey which appears to suggest that the transformation program is weighing heavy on employees; optimism, trust in top management and pride in working there are all down. (Bloomberg)

The literal meaning of “nepo” is “nephew”, but Aaron Weitman of CastleKnight Management appears to be doing pretty well independently of his famous uncle, David Tepper. (Financial News)

Although Ken Griffin complained last week that CEOs were finding it tedious to spend their time sucking up to successive administrations, Goldman Sachs’ David Solomon is built different, and can always spare some time in an interview to talk about how great the President’s pro-growth policies are going to be. (FT)

Rajeev Misra used to be famous for taking meetings barefoot, and for making huge bets at the SoftBank Vision Fund, some of which worked well and some less so.  He’s always been at the cutting edge of new trends, though, so it is interesting to see that he’s pivoting his own investment vehicle away from private credit and towards investments in natural resources. (Bloomberg)

Traditional futures trading desks have tended to enforce quite strict separation between the activities of “market making” and “trading like a complete chump”.  But prediction markets, at least while the SuperBowl is being played, let you combine the two. (WSJ)

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