Morning Coffee: JPMorgan punishes traders for $120m loss that nearly grew. HSBC bankers could feel like they work for Goldman Sachs
JPMorgan is vengeful, but it bides its time about it. Bloomberg reported yesterday that the bank has made deep cuts to its precious metals trading business after a year spent reviewing its exposures and an event that could have cost it billions.
The event in question was the massive short bet by Chinese industrialist Xiang Guangda that nickel prices would fall in early 2022, when they did the exact opposite. Guangda built up a short position of 150,000 tons of nickel, of which 50,000 was held through an over-the-counter position with JPMorgan. When the price of Nickel soared on Russia's invasion of Ukraine, Guangda's Tsingshan Holding Group at one point faced a $10bn loss in early March last year. JPMorgan would reportedly have been owed around $1bn in margin calls, which Guangda wouldn't have been able to pay. Bankers were unsurprisingly wan-faced; discussions went on through the night.
In the event, JPMorgan was saved by the London Metals Exchange, which first intervened to stop prices rising further and then suspended trading while Guangda arranged a deal with the banks. As a result, JPMorgan's loss was a mere $120m.
The incident - combined, perhaps, with the accidental purchase of some painted rocks instead of actual nickel, and the prosecution of two ex-JPMorgan metals traders for spoofing, seems to have convinced JPMorgan that trading precious metals isn't such a good idea. Following the crisis, Daniel Pinto himself reportedly took control of the bank's remaining nickel position. Bonuses were slashed, and the business at JPMorgan is being reviewed, with large base metal clients - especially in Asia - being culled.
None of this can be good for JPMorgan's base metal traders themselves, especially in Hong Kong and Singapore. However, the bank reportedly still has a base metals business in Asia, so they're presumably still employed. And if they want to leave, there may be alternatives - Deutsche Bank was spied hiring itself a new precious metals trader recently.
Separately, now that HSBC has more people working from home and doesn't need up to 40% of its London office space, it's looking for new and smaller premises in London. One of the possibilities is reportedly Goldman Sachs' old office in London's Fleet Street. It wasn't long ago that HSBC's bankers were being paid a bit like Goldman's circa 2020. Now they'll be able to walk in their footsteps from three years ago, too.
Meanwhile...
EY racked up $600m in costs from now-cancelled plans to split its auditing and consulting business. This included $300mn of internal costs for work done by EY’s own staff. The deferral of other projects saved a further $400m. If the split had gone ahead it would have cost EY up to $2.5bn plus bankers’ fees. (Financial Times)
UBS hired consultancy firm Oliver Wyman to help it integrate Credit Suisse. Ex-Morgan Stanley banking analyst Huw van Steenis is vice chair of Oliver Wyman and formerly worked for Sergio Ermotti as an advisor. (Bloomberg)
RBC has emerged as the biggest funder of the fossil fuel industry. “RBC is moving in completely the wrong direction, dragging our climate ambitions backwards and positioning Canadian banks as fossil fuels’ lenders of last resort.” (Financial Times)
Truist cut about 80 people in its Atlanta and Memphis, Tennessee offices as prepares to stop sales and trading of mortgage-backed securities and government-agency and Small Business Administration bonds. (Bloomberg)
JPMorgan's compliance officers flagged that Jeffrey Epstein might be an issue in 2011. (WSJ)
UBS accounts for about 200% of Swiss GDP. This is comparable to the amount of bank liabilities guaranteed by the Irish government at the start of the global financial crisis. (Economics Observatory)
When people received emails outside work hours, they thought senders expected faster replies than they did and this made them stressed. “This isn’t urgent, so get to it whenever you can” was enough to alleviate the perceived pressure to respond quickly. (NY Times)
Even when women earn as much as their husbands, they still put in around two more hours a week on caregiving than their husbands do, plus another 2.5 hours more on housework. In those same relationships, men spend nearly 3.5 more hours on leisure activities, such as watching television or playing videogames, than their wives do. (WSJ)
Women should play more golf. By not golfing, women not only miss out on the experience but also conversations about the experience. They also miss out on the chance to be more visible within their organization, converse with decision makers and put themselves in a better position for promotions. (WSJ)
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