It is a tough time to be the head of an investment bank, as new regulations and the need to cut costs take their toll.
This year has proved a tumultuous one to be the chief executive of a large global bank. Credit Suisse, Barclays, Deutsche Bank and Standard Chartered have all parted ways with the men leading their organisations in the past 12 months, and the new blood brought to replace them all face serious challenges in setting out a viable future for their organisations, in particular their investment banking businesses.
John Cryan, Deutsche Bank’s new chief, has perhaps the weightiest in-tray. At the end of the third quarter of 2015, the lender warned investors of an expected €6.2bn loss, in part due to provisioning for regulatory fines, more capital for its investment bank and the poor performance of a number of its subsidiaries. The bank has embarked on a costly restructuring programme that, among other things, is likely to see it pull back from credit derivatives markets and slim down its staff numbers in fixed income and equity trading.
At Credit Suisse, Tidjane Thiam, who became chief executive in June, almost immediately signalled a shift towards private banking and away from investment banking activities, mirroring a move that has already taken place at fellow Swiss bank UBS. Meanwhile, it is understood that Barclays is looking to ex-JPMorgan banker Jes Staley to take the helm, though the bank must first persuade the Bank of England and the Financial Conduct Authority that he is the best person for the job. Mr Staley is known for his aggressive style of banking, but this may be stymied by the bank's need to cut costs and live within the parameters set by strict new regulations.
That is the problem faced by all investment banks now – how to remain active and profitable across a wide range of markets when capital and liquidity requirements are drastically higher, when the structure of the market is changing rapidly and when non-bank market-makers are muscling in on banks’ territory. The pace of change has been frantic in the past half-decade or so and many bankers are convinced that it will not let up any time soon. Consequently, it is incredibly difficult for investment banks to design a durable, long-term strategy, as they cannot plan for what can’t be seen round the next corner. Rather than dig in and weather the storm, many banks seem to be leaving the investment banking space altogether, or at least cutting down their operations within it.
