There are few more joyous moments for a bond trader than seeing someone make a huge and embarrassing mistake that doesn’t cost any money and can’t reasonably be blamed on you. So the mirth was considerable in the City of London yesterday morning, when some fat-fingered official at the Office for Budget Responsibility managed to publish the UK budget forty minutes ahead of schedule. Perhaps it went up while the senior staff were walking back from the Bloomberg terminal they have to borrow from a Treasury office half a mile away.
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Once upon a time, this would have been a huge scandal, but it seemed less significant in a week when nearly all the key measures had been either leaked or semi-officially announced anyway. The head of the OBR will “abide by the results of an investigation” rather than resigning immediately, and the budget itself seems to have been quite well received by the markets – the only people really hurt will be any sterling rates traders who went for an early coffee or comfort break in the belief that they had plenty of time.
The laughter seemed to die down later, though, when the bankers realised that although the headline rates weren’t changing, there were plenty of tax grabs in this budget aimed at rich people. Among the things being taxed were dividends, pension contributions, big houses and electric vehicles; pretty much all the things that Managing Directors like.
How did they react? Headhunter Jason Kennedy said that “Those who can are leaving. Those stuck with kids are biding their time and those setting up businesses are considering other options”. That might perhaps be a tiny bit exaggerated, but it’s quite likely that, at the margin, international firms considering where to locate senior expats might take the tax environment into account, and domestic millionaires might continue to consider the benefits of Dubai.
Elsewhere, there will have been even bigger celebrations in Citi’s energy investment banking team, at the news that they have won the pitching battle for a big deal with Saudi Aramco to sell a stake in its oil terminals business. But who will be claiming the credit?
Of course the answer is “everybody”, because this is an investment bank. And it’s likely that Rajat Katyal, the banker hired from HSBC a month ago to be head of the EMEA energy investment banking team will be using it as evidence that he’s hit the ground running. But it’s quite interesting that the only banker actually named in the press coverage is Jane Fraser herself.
This might be because it’s actually her ticket, to a great degree. Saudi Aramco is famously not like other clients. It’s huge in market cap and its management is very intertwined with the Saudi state and the royal family. For this reason, it has to be treated with the utmost respect, and it’s quite common for CEOs to be personally involved in pitches there – Jamie Dimon and David Solomon have both got their hands dirty in past Aramco deals.
In fact, Dimon was in Riyadh only a month ago, partying down with the Aramco CEO at the 90th anniversary celebrations of JPMorgan’s Saudi office. It might have been a purely social event, but it would surely have broken the habit of a lifetime if Jamie was in the same room as someone with a multi-billion dollar mandate and didn’t even mention it.
It seems that Citi have pipped JPM. Not only that – and potentially making the victory even sweeter – there doesn’t seem to be any mention of Michael Klein, the former Citi banker who has enjoyed an extremely strong personal franchise in the Middle East, and whose eponymous boutique did a big deal for Aramco last year.
Jane Fraser has never been the kind of CEO to steal the limelight, so we’d guess that even if it was her that landed the deal, we’ll never hear about it and she’ll be happy to give the credit to a team effort. But in any case, it seems that what has been an occasionally frustrating year will be ending strongly for Citi’s investment bankers. They might even be able to celebrate with a glass of something, as Saudi Arabia is opening up more liquor outlets for foreigners.
Meanwhile …
The humans are fighting back against the robots in the US treasury market. Since a lot of the action is now in “basis trades” which require multiple simultaneous transactions including arranging financing, the share of “voice” trading (although actually most of it is arranged over instant messaging) has increased significantly. (FT)
RBC Capital Markets has been noticeable in the market for senior bankers recently, and has now recruited Sid Chibbar, the co-head of Barclays EMEA healthcare team. (Financial News)
David Sambur of Apollo is throwing shade at competitors who got rich during the “low quality returns” period when private equity was able to “ride the wave” of cheap money, expanding multiples and revenue growth. Now, he says, “Funds with middling performance that haven’t returned capital aren’t raising, and that’s well deserved”. It feels like people who are stuck in “zombie” funds shouldn’t be thinking of Apollo as a future career option. (Bloomberg)
About a dozen AI PhDs were working for Uber on a “Project Sandbox”, and appear to have been let go two months before the end of their contract. Nobody wants to say why, but there’s no shortage of vacancies for them in banking. (Business Insider)
Jefferies has begun to expand its “outsourced trading” operation from equities to fixed income, believing that there is a lot of demand from hedge fund clients. They are “looking to expand by hiring traders with buyside experience”. (Financial News)
It’s unlikely that anyone reading this would be dumb enough to try out Grok’s “epic vulgar roast” setting at work, even if Elon Musk has been promoting it. But in case you were tempted to give it a go on your family at Thanksgiving, be warned that it seems to only have two or three jokes, and a tendency to accuse people of wearing corduroy when they aren’t. (WIRED)
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