The Wall Street bank cosying up to superstar lawyers

One big scoop as the FT Banking Summit kicks off: Barclays is exploring a plan to drop thousands of clients at its investment bank as part of a strategic overhaul designed to boost profits and cut £1bn of costs. Details on the project codenamed Minerva here.

In today’s newsletter:

• JPMorgan vs Citi battle for lawyers

• Signa too messy for Elliott

• Burner phones in Hong Kong

JPMorgan tries to poach clients on Citi’s turf

The Financial Times was ahead of the pack in spotting that superstar lawyers were earning enormous salaries that would rival top bankers, but one firm beat us to the punch decades ago and it isn’t one that you’d expect. 

Few outside the mahogany corridors of Manhattan’s legal elite are aware that Citigroup, the struggling US bank in the midst of a giant round of lay-offs, is the most dominant service provider to the legal business.

Citi’s pursuit of hotshot lawyers started in 1971 when two of its private bankers had the brilliant idea to court partners from white-shoe law firms whom they figured had rich clients they could refer to the bank. 

As well as taking in these clients, Citi quickly began banking the lawyers and law firms themselves, giving it a head start in a market it has now come to dominate.  

Citi says it serves 700 law firms and 50,000 lawyers in the US and Britain, providing services that include favourable mortgage rates. (The dirty secret of being rich is that you pay less for loans than normal people. It also means someone actually picks up the phone when you call the bank.)

But Citi’s status as the go-to bank for wealthy lawyers is under threat. 

Jamie Dimon’s JPMorgan Chase has its eyes on this lucrative clientele and earlier this year poached a star in Citi’s wealth management team. Bola Oyesanya, who was running Citi’s law firm group focused in New York, joined JPMorgan in July to run its law firm banking team. 

In the battle for Oyesanya, Citi’s chief financial officer Mark Mason personally spoke with her to try to convince her to stay, according to a person familiar with the matter. Once Oyesanya joined JPMorgan, she received a call from Dimon himself.

The move is the latest attempt by JPMorgan to beef up its legal wealth management business after two decades of trying to break the grip of Citi in New York, as well as that of Wells Fargo, which dominates outside of the city.

One reason JPMorgan has been unsuccessful is that Citi and Wells offer quasi-consulting services to law firms that provide detailed intelligence on how they compare with their rivals.

“We get asked from time to time to consider other private banking relationships, but our firm would never leave Citi,” said a partner at one of the world’s largest law firms. “No one can match the data they have, and access to it is essential to my practice.”

That isn’t to say that JPMorgan hasn’t made some headway. Sources tell DD that they like the bank’s private banking services and top earners have started moving over with one person estimating that about a quarter of the highest compensated partners are banking with JPMorgan.

Signa tries to secure urgent funding

The crisis engulfing Austrian property group Signa appears to be too hot for even one of the most feared hedge funds, Elliott Management. 

Signa, the European luxury developer which co-owns iconic real estate like Selfridges in London, KaDeWe in Berlin and the Chrysler Building in New York, has been struggling to meet its financial obligations this year.

Its finances have deteriorated sharply in the face of falling commercial real estate values and rising interest rates. René Benko, its charismatic billionaire founder, was forced off the board this month by his minority co-investors while the company undergoes an urgent restructuring.

In dire straits, the company turned to Elliott for more than €400mn of financing to save it from collapse but the firm had too many concerns about the size of Signa’s debts and no deal was reached, two people familiar with the matter told the FT’s Sam Jones and Olaf Storbeck.

Signa also approached other investors, according to industry insiders, a sign of how widespread the challenges facing the group are. That has prompted dozens of Signa’s lenders across Europe to assess what the potential financial damage could be if the group collapses. 

On Monday, Swiss bank Julius Baer said it was reviewing its private debt business after revealing a €606mn exposure — its single largest — to a “European conglomerate . . . in commercial real estate and luxury property”, which people close to the bank said was Signa. 

But lest DD readers worry that Benko’s lifestyle has been ruined by the crisis, fear not: German tabloid Bild spotted him taking his private jet to Barcelona for the weekend where he went shopping with his wife.

The global city where Big Four professionals use burner phones 

For decades, Hong Kong has made its name as a global city, a place where companies could base their Asia-Pacific headquarters and do business with little friction.

That is grounded in the “one country, two systems” model, which lets the special administrative region operate on different rules from mainland China. But as Beijing exerts greater control over the territory, things are becoming more complicated.

These days, Deloitte and KPMG are asking some US-based staff to use burner phones when they travel to Hong Kong, DD’s Kaye Wiggins and the FT’s Leo Lewis and Joe Leahy report. Several McKinsey consultants have also taken separate phones with them when visiting the territory.

“We have been recommending for several years that clients treat the risk of being in Hong Kong as the same as mainland China,” said a senior executive at a cyber security firm that counts large consultancies among its clients.

“I think what you’re seeing is that message sinking in now.” The person said there was “a range of risks, up to and including the risk of infiltration by a state-backed hacker”.

The policy is partly about risk aversion. A UK-based consultant at a Big Four firm said consultancies had in general become increasingly cautious, in part because of fears of legal liability for a leak of client data.

Still, for people trying to do business in Hong Kong, the moves are frustrating. Nobody wants to be without their usual phone, so getting dealmakers and advisers to visit from overseas can be hard. A senior executive at a global consultancy summed it up: “People are not prepared to come here.”

Job moves

• Latham & Watkins has added two partners to its banking team in London. Fergus Wheeler and Paul Yin, both private credit specialists, who are joining from US rival Akin Gump Strauss Hauer & Feld.

• Schroders has appointed Frederic Wakeman as an independent non-executive director on its board from January. He was formerly a managing partner and head of technology, media and telecommunications at Advent International. 

• Richard Watts and Nick Williamson, the managers of the Chrysalis investment trust, are leaving asset management group Jupiter.

• Law firm Paul Hastings has hired investment funds lawyer Anna Rips as a New York-based partner. Rips previously worked at Skadden, Arps, Slate, Meagher & Flom.

Smart reads

Gambling on the future Anglo American is betting $9bn on a fertiliser mineral for which there is currently little demand, in a high-stakes strategic shift from coal mining to helping stave off world hunger, the FT reports.

Red Flags Studios and video platforms lined up to finance a sci-fi project made by little-known filmmaker Carl Rinsch. Netflix has burnt more than $55mn and has little to show for it, The New York Times reports.

The Money Supermarket The 1998 megamerger between banking giant Citicorp and insurer Travelers Group created the world’s biggest financial services company. The experiment hasn’t gone to plan. An FT Film looks at what went wrong.

News round-up

UAE planned to use COP28 summit for oil deals, documents show (FT)

Abu Dhabi’s media record under scrutiny after Telegraph deal offer (FT)

Bayer chief blames thin drug pipeline on ‘years of under-investment’ (FT)

Africa’s richest man under pressure as giant refinery nears production (FT)

Schaeffler raises Vitesco offer as it pushes into electric vehicles (FT)

Japanese bank chief Jun Ohta dies aged 65 (FT)

Sunak courts international investors with UK’s ‘low tax approach’ (FT)

Amazon’s purchase of iRobot could restrict competition, EU regulator warns (FT)