People say that no one in banking suffered during the financial crisis. Or that they didn’t suffer enough. I would like to offer myself as a counterfactual.
Before the financial crisis, I was an analyst covering the banking sector. In 2007, I was working for SocGen, the French bank. It was not a great place to work. We were given a lot of very contradictory goals, such as, “Publish more sell notes on companies” – and also – “persuade those same companies (who don’t like sell notes) to go on corporate roadshows with you”. It used to take me a month to publish a research note, because so many at SocGen got to edit and change what I had written. By the time my notes were published they were out of date because the share price had moved or new information had come out.
It was all incredibly frustrating. One time a colleague told me, “You know Bruce, you write really clearly” – as he scribbled out the entire executive summary at the front of the note and completely rewrote it. Then he resigned to become a partner in a Financial PR firm.
By May 2007, the financial crisis was showing signs of starting. When HSBC had announced its full year results a few months earlier, the finance director Douglas Flint had effectively told all the analysts that HSBC may have lost money, but at least it was aware that this had happened. Other banks had no idea that their credit derivatives backed by subprime mortgages were worth nothing, said Flint. But they’d found out soon enough.
Despite these ominous signs, I went on holiday. Skiing. My bosses kept trying to call me because all kinds of banks were bidding for ABN AMRO, but I was in a valley with no signal. Fortunately, all the questions left for me on my voicemail had answered themselves by the time I picked up the messages two weeks later.
When I got back from skiing, not only had RBS emerged as the likely buyer of ABN AMRO, but I had lost my job. Soc Gen hired two analysts from Dresdner Bank to do what I was doing. This seemed odd given that only weeks before they’d paid me a healthy bonus and told me how well I was doing. Still, c’est la vie.
This was before the financial crisis hit with full force, so I got myself another job pretty easily. This time I went to Pali, a small brokerage firm in London’s Mayfair which was owned by some billionaires from America. First I suggested that Northern Rock might be in serious trouble, then I suggested that HBOS might be in trouble, which promoted the finance director to call me up and go ballistic. Around this time, Barclays Investor Relations took me out for lunch and told me I was being far too negative. Meanwhile, the guys who’d replaced me at SocGen (and who had already been poached by BNP Paribas) had Bradford & Bingley as their top stock pick for the year. They didn’t care: they were on big guaranteed bonuses and being wrong was no big deal.
I published a note suggesting looking at the Nordic and Japanese banking crises and suggesting that this crisis might mean banks would need a government rescue. It was well-received but then… I lost my job. It turned out the billionaires at Pali had been losing money. It didn’t eactly help that I suggested to a Pali salesman that his buy-to-let property empire might soon go bust and this salesman had recently become my boss.
I found another new job! It paid 70% less, but hey. I published a research note saying banks needed to further shrink their balance sheets because of further losses to come. And I put an 18p price target on RBS. At that point the shares were above 50p and this seemed aggressively low.
I was there for six months and then….my employer decided to hire in a huge team of people from Dresdner Bank, which had decided to all but close its equities division. So, I was ousted by people from Dresdner again, which seemed odd given that Dresdner had been losing money money all year…
I was annoyed. I decided to go skiing, for a long time (an entire year). When I came back, I masochistically got another other banking research job. There, I suggested bank shares could fall 50%, which they duly did. Then, the company I worked for went bankrupt.
Strangely, I haven’t worked as full-time bank researcher, or for a bank since. The crisis kind of killed my banking career. Don’t presume, though, that things ended badly. I moved to Berlin and made a lot of money from German property. In March 2009 I bought some L&G shares at the bottom. I spent my summer going to the sorts of electronic music festivals where DJ D Sol doesn’t get asked to play. Whenever I meet up with friends still working in equity research they seem miserable because of MIFID II, falling commissions etc. By forcing me out of banking, the financial crisis may have done me a favour.