[D i g i S y n c]

Originally Posted by nikhilkulk

Lehman BPO shows door to 180- ITeS-Infotech-The Economic Times

Nikhil

Thanks for the help

This was expected. A large number of city employees (some 2K+) were shown door last year. Financial professionals had to face a lot of similar issues in the UK and the US. Experts predicted that no matter how bad they do in the US and the EU, they won't really have a problem in Asia Pacific. They were wrong. Still, it's not that bad I'd say. These jobs mentioned in the article are only from the BPO sector. Obviously they are the ones who are going to get hit first if anything goes wrong with their firm. It is because of these guys that others are safe (BO and FO positions). Lehman Brothers always supposed to be loyal with their employees on a long term basis. Many banks follow the same trend if I'm not wrong. But we can't expect the banks to be friendly in a bear market, can we?

If you guys remember, Lehman Brothers was hiring a number of people for their Mumbai office. This was 1-2 months ago. I saw their almost half page big advertisement in the newspaper. Those were for a variety of positions - analysts to vice president. The firm was doing bad financially and their assets were at risk. They still had to take such drastic decision of hiring top management level professionals mainly because their key players quit and joined other firms.

Lehman Brothers is supposed a top 5 investment bank as far as mergers and acquisitions and fixed income( FICC trading?) is concerned. But now we won't be surprised if the company is supposed to sell off it's assets:(


Cheers!

[Tumtum]

Originally Posted by Đ i g i S y n c

Thanks for the help

This was expected. A large number of city employees (some 2K+) were shown door last year. Financial professionals had to face a lot of similar issues in the UK and the US. Experts predicted that no matter how bad they do in the US and the EU, they won't really have a problem in Asia Pacific. They were wrong. Still, it's not that bad I'd say. These jobs mentioned in the article are only from the BPO sector. Obviously they are the ones who are going to get hit first if anything goes wrong with their firm. It is because of these guys that others are safe (BO and FO positions). Lehman Brothers always supposed to be loyal with their employees on a long term basis. Many banks follow the same trend if I'm not wrong. But we can't expect the banks to be friendly in a bear market, can we?

If you guys remember, Lehman Brothers was hiring a number of people for their Mumbai office. This was 1-2 months ago. I saw their almost half page big advertisement in the newspaper. Those were for a variety of positions - analysts to vice president. The firm was doing bad financially and their assets were at risk. They still had to take such drastic decision of hiring top management level professionals mainly because their key players quit and joined other firms.

Lehman Brothers is supposed a top 5 investment bank as far as mergers and acquisitions and fixed income( FICC trading?) is concerned. But now we won't be surprised if the company is supposed to sell off it's assets:(


Cheers!

IMO, Ibanks showing door to their employees is purely a matter of market dynamics coupled with cost-benefit pressures.

In the US and EU post sub-prime mess, a lot of employees in almost all major Ibanks have been shown the door and Ibanks have now increased their reliance on their Indian captives/KPOs.

As a strategy to sustain themselves, most Ibanks are now not averse to offshoring all but core sales work to Indian captives/KPOs in a bid to drastically cut costs while not compromising on work quality.

In the future, you folks should not be surprised to see Ibanks having staff running into thousands over here whereas their overseas staff would be considerably lesser.

You may ask, why so? The simple answer is that they save by employing people here to do work as they pay in rupees. Hence all the major work can be done here and the final work of sales and generating revenues can be kept overseas.

[D i g i S y n c]

Originally Posted by Jackal

aah i forgot about the indian investment banks.. they are bigger than the foreign arms of global IBs.. but if you look at the volume of business in India and the no. of employees in Indian IBs and no. of employees in firang IBs working on Indian investments.. dont u think the no.s are way too small and insignificant.. In fact if you look at the work outsourced by global banks (read KPOs both captive and 3rd party) it's a lot more.. i dont have figures to substantiate this but correct me if i am wrong..

coming to the gloomy picture, i dont think it's going to last long.. just like the current down-state of the Indian IT industry, this is also gonna pass.. companies are soon going to realize that the only way to save more money and survive this situation is to offshore more work (Barclays recently decided to outsource 1800 IT jobs to offshore locations) i think same is gonna happen with all other work sooner or later.. so i dont think india should have anything to worry about..
counter opinions welcome

Indian IB's have larger number of employees as compared to the international IB's in India.

First reason: I think the reason is that international IB's have already successfully operated these businesses all over the world. They are smart enough to open up new businesses in the any region they feel like. They did the same in India. At the top management level these IB's have big players who have worked globally and have some real good experience in the industry. These can be a combination of Vice Presidents, Managing Directors, Global Heads who have successfully made an impact on the firm with their past records. Obviously these people know how to play the game smart.

Second reason: Number of employees here in India are high because of the BPO/KPO businesses. All back office work. For them it's cheaper. This goes for international as well as Indian IB's. People sitting in London, NY and Tokyo will make the real deals. To support these deals they need a number of people and the solution is India. Tumtum properly mentioned the same. We shouldn't really be surprised if number of employees working in India for any given bank is quite high as compared to international locations. But remember, most of the Indian staff here (90%+?) won't be doing anything but research, trade settlements etc for years. People in London, NY and other major cities will always be the real big players!!!

The number of employees should not matter really. What should matter is the quality of work they do and the money they make eventually. The top full-service IB's are usually overstaffed. Hence when things go bad they are in a position to ask their employees to leave. I had a chance to interact with an analyst working at a top 5 IB in their global markets division. She had to spend a lot of time to get promoted. Responsibilities were not great at all. That also means that there was no great chance to learn more in a short period of time and develop herself. I asked her the reason. As expected she said its overstaffed!!! This won't happen in some hedge fund. Blackstone, Evercore Partners and few other hedge funds who are doing very well have a very small setup. Number of employees working with them are 'very less'. That means more responsibilities. Still they manage to deal in billions of dollars. These people get paid more. Job is risky but rewarding.

As far as back office jobs are concerned, if things go bad these people will be affected the most. Next will be the KPO employees? They will be the low performers, say bottom 5%?

People in India should be worried mate. If the current conditions don't improve banks will probably ask thousands of their BPO employees to leave. They won't be shy to do that. For them what matters is their business, current financial status. Employees can always be fired if needed and then hired.

Lehman Brothers declared a net loss of $2.8 billion.

Find the detailed press release here :-
http://www.lehman.com/press/qe/docs/061608_2q08.pdf


Cheers!

[Tumtum]

Originally Posted by Đ i g i S y n c

Indian IB's have larger number of employees as compared to the international IB's in India.

Lehman Brothers declared a net loss of $2.8 billion.

Find the detailed press release here :-
http://www.lehman.com/press/qe/docs/061608_2q08.pdf


Cheers!

Look at the condition of Merrill..this para from an article in Bloomberg says it all:

Merrill Lynch underlined the depth of the credit crisis in a drastic move Monday night to bolster its depleted balance sheet, revealing an $8.5bn share offering and $5.7bn in writedowns linked to the sale of toxic mortgage securities. The move comes just 10 days after Merrill reported a $4.6bn Q2 loss, including a $9.4bn write-down, and announced asset sales aimed at raising $8bn in capital. Altogether, it has had to raise more than $26bn from outside investors, including the latest share offering. Among other investors, Singapore’s Temasek has agreed to buy $3.4bn worth of the public offering in a deal to avoid paper losses on the $5bn it invested in Merrill late last year. Lex says the new plan confirms the extent of Merrill’s problems. And “like most horror franchises, the sequels to Merrill’s original chiller appear never-ending”.

More to come as and when I come across something interesting.

Cheers !

[krishsuraj]

Originally Posted by Jackal

aah i forgot about the indian investment banks.. they are bigger than the indian arms of global IBs.. but if you look at the volume of business in India and the no. of employees in Indian IBs and no. of employees in firang IBs working on Indian investments.. dont u think the no.s are way too small and insignificant.. In fact if you look at the work outsourced by global banks (read KPOs both captive and 3rd party) it's a lot more.. i dont have figures to substantiate this but correct me if i am wrong..

Ya KPOs of IBs are bigger in size in India but work is being outsourced from all over the world to India. Comparing them wont be right.
Is the Indian IB industry small? I would say Yes.
Insignificant? No way!!!!

M&A deal sizes are small and are mostly run by foreign IBs, especially the cross border ones. In IPO, undoubtedly Indian firms are kings - especially Enam, JM & Kotak. With so many PE firms coming into India for investing and many of them raising India specific funds, the activity in this area is pretty much there. Even in this lean season, my team managed to close 5 deals in the past month and most IBs are doing decently well in this front. With IPO not an option now, private placements are booming as the promoter needs to raise capital from somewhere now. Though bonuses are expected to be low this year, the IPO market is expected to pick up by November.

@suraj: well abt the Mck recruitment thing.. i have heard different views on this.. how many of those 50 are for the knowledge center??

47 of those recruited are from the IIMs and ISB ( My roomies work there and hence the exact figure ). They dont recruit for Mck Knowledge center from these colleges. In Fact, all the 50 ppl have joined Mck, India. Some were even recruited for Mck, NY/London/Brussels etc.. from the IIMs. I guess put together the figure was around 70!!!!!

[anandv]

@Suraj: You forgot Edelweiss. I guess they are better known as Indian Goldman Sachs

@WSW: US banks are greedy? :: Agreed
But I don't think Indian banks will be too affected with subprime. Ofcourse they may have exposure to US mortgages, albeit they are very low. They might be having exposure to mortgages in Indian markets. But chance of subprime in India is very rare
I know real estate market is down 10-15% in India, but it will not go the US way.
I think the basic reason is the difference in Indian and US mentality. In India, house is seen as place where we live, place of worship: vastu puja etc. In USA, house is seen more of an investment. So Indians are more attached to their homes rather than US people. I mean if prices in Mumbai go down, that doesn't mean that I will sell my house and go to Koparkhairane Which is not the same case in US, they will sell houses like stocks
And that's why prices can not go too low in India like USA as there won't be more sellers than buyers.

[krishsuraj]

@anandv - I didnt forget Edelweiss, they are very small in Indian I-Banking space, they r decently sized on the trading side.... I did miss one Indian IB though, DSP ML, but only 5% stake is with the Indian partner now!!!!!

[D i g i S y n c]

Most of the international IB's invested in the reality sector in India. I believe they have stopped doing the same any longer.

When we ask for the reasons for such big firms going down, people usually say 'risky bets'. What exactly could these risky bets be? Sub-prime crisis caused a lot of pain to the industry. To add to that, during past few months oil and metal prices went up globally.

IBs' make money and they grab any opportunity for the same I believe. Wasn't the prices going up an opportunity for them? Most of the IBs have their own proprietary trading desk. I've read that people working as proprietary traders are the best in their firm. Not sure about the hierarchy in that particular department. But I'm sure there are people in the department who can invest in anything around the world- commodities, FX, vintage cars, large wheat farms, Boeing jets, golf courses etc. Their only intention is to use banks money and make profits for the bank.

Majority of the profits for a bank comes from their proprietary trading desks. Banks own assets worth billions of dollars. Say a bank owns few golf courses in Japan. They brought them in the year 2005 at cheap. Now in 2008 there are others who want to buy them at more than double the price + interest rate and appreciation for 3 years. This is major profit. The bank also knows that this is the peak. Prices won't go any higher than this. That probably is the best time to sell off those golf courses. Fine. Bank sold off the golf courses and lost some asset under their tag BUT at the same time they made major profits. The same capital can be diverted to some other businesses in the same bank which needs support. At the same time few agencies (rivals of the bank or simply the media) can spread news like, "Bank ABC takes aggressive stance, sells off assets to patch up losses, investors beware!!!"

Please let me know your thoughts on the above. Again, I have not really made any specific point. Lets try to divert a little (if you all agree to) and discuss if proprietary trading can be called as the back-bone of an investment bank. If not, then how vital is the proprietary trading department for any given investment bank and what all it takes to reach there!!!


Cheers!

[Tumtum]

Originally Posted by D i g i S y n c

Most of the international IB's invested in the reality sector in India. I believe they have stopped doing the same any longer.

When we ask for the reasons for such big firms going down, people usually say 'risky bets'. What exactly could these risky bets be? Sub-prime crisis caused a lot of pain to the industry. To add to that, during past few months oil and metal prices went up globally.

IBs' make money and they grab any opportunity for the same I believe. Wasn't the prices going up an opportunity for them? Most of the IBs have their own proprietary trading desk. I've read that people working as proprietary traders are the best in their firm. Not sure about the hierarchy in that particular department. But I'm sure there are people in the department who can invest in anything around the world- commodities, FX, vintage cars, large wheat farms, Boeing jets, golf courses etc. Their only intention is to use banks money and make profits for the bank.

Majority of the profits for a bank comes from their proprietary trading desks. Banks own assets worth billions of dollars. Say a bank owns few golf courses in Japan. They brought them in the year 2005 at cheap. Now in 2008 there are others who want to buy them at more than double the price + interest rate and appreciation for 3 years. This is major profit. The bank also knows that this is the peak. Prices won't go any higher than this. That probably is the best time to sell off those golf courses. Fine. Bank sold off the golf courses and lost some asset under their tag BUT at the same time they made major profits. The same capital can be diverted to some other businesses in the same bank which needs support. At the same time few agencies (rivals of the bank or simply the media) can spread news like, "Bank ABC takes aggressive stance, sells off assets to patch up losses, investors beware!!!"

Please let me know your thoughts on the above. Again, I have not really made any specific point. Lets try to divert a little (if you all agree to) and discuss if proprietary trading can be called as the back-bone of an investment bank. If not, then how vital is the proprietary trading department for any given investment bank and what all it takes to reach there!!!


Cheers!

Digi.

The trading desks across most Ibanks are generally flat in structure. By saying “flat”, I mean to say that an Associate, an AVP, a VP and a Director could all be on the same desk and do the same work- trading. I have seen this for myself so I can say for sure. There is no “formal reporting” or hierarchy that is followed on a trading desk but yes, respect and discipline for seniors is generally observed despite the very volatile environment.

The “Prop Trading” desks that you are talking about in Ibanks are actually elite desks…as in only some traders who have a very good track record and experience in investing and making consistent “alpha” are given the job. However, these desks are specific to an asset class as in….”Equities Prop Trading Desk” or “Commodities Prop Trading Desk” and so on. So these desks in Ibanks deal only in specific asset classes.

The kind of "desks" or investments you are talking about are what we typically call “Hedge Funds”.

Hedge funds take exposures not specific to one asset class…..they invest in equities, fixed income, commodities, real estate, gold, livestock, weather derivatives, bet on horse races and what not. For them the sole aim is making money and hence they are not restricted to any specific asset class.

Secondly many aggressive Hedge Funds are known to promise upfront to their clients a “specific rate of return” that they guarantee on a client’s investments and hence in a bid to provide higher returns, they generally set up their shop in “tax havens” such as Cayman Islands, Mauritius and Dubai. Also they are very secretive about the kind of investments they do.

So my friend….you have sort of mixed up two concepts- Prop Trading Desks at Ibanks and Hedge Funds…but I hope you are clear on it now…feel free to ask more.

Regards.

[anandv]

Originally Posted by Tumtum

Digi.

The trading desks across most Ibanks are generally flat in structure. By saying “flat”, I mean to say that an Associate, an AVP, a VP and a Director could all be on the same desk and do the same work- trading. I have seen this for myself so I can say for sure. There is no “formal reporting” or hierarchy that is followed on a trading desk but yes, respect and discipline for seniors is generally observed despite the very volatile environment.

The “Prop Trading” desks that you are talking about in Ibanks are actually elite desks…as in only some traders who have a very good track record and experience in investing and making consistent “alpha” are given the job. However, these desks are specific to an asset class as in….”Equities Prop Trading Desk” or “Commodities Prop Trading Desk” and so on. So these desks in Ibanks deal only in specific asset classes.

The kind of "desks" or investments you are talking about are what we typically call “Hedge Funds”.

Hedge funds take exposures not specific to one asset class…..they invest in equities, fixed income, commodities, real estate, gold, livestock, weather derivatives, bet on horse races and what not. For them the sole aim is making money and hence they are not restricted to any specific asset class.

Secondly many aggressive Hedge Funds are known to promise upfront to their clients a “specific rate of return” that they guarantee on a client’s investments and hence in a bid to provide higher returns, they generally set up their shop in “tax havens” such as Cayman Islands, Mauritius and Dubai. Also they are very secretive about the kind of investments they do.

So my friend….you have sort of mixed up two concepts- Prop Trading Desks at Ibanks and Hedge Funds…but I hope you are clear on it now…feel free to ask more.

Regards.

Now that Tumtum Sir has opened the topic of hedge fund, the best book to be read is: When the genius failed. It is about rise and fall of LTCM.
Talking about Hedge funds' secrecy, one will find that most of the funds don't have any websites or only a plain website. Most funds wont let their investors know about their exact investments either. All their efforts are towards the absolute returns by hook or crook.
Ofcourse given, the secretive nature of HFs have attracted strong critics from many, givent the fall of LTCM, AMaranth and more. But yes, still they prosper and do not come under the purview of SEC,SEBI,FSA etc.

Any idea about total compensation of Indra Nooyi in 2007? Approx 15-20 mil USD
Any idea about compensation of best HF manager in 2007? :More than 1000 mil USD.