It's been a difficult day for Deutsche Bank. Downgraded by Moody's for the second time this year, DB's unsecured senior debt is now only two notches above junk. In terms of counterparty risk, Deutsche is now judged A3 instead of A2- still comfortably investment grade, but less so than previously. For the sake of its fixed income trading business, Deutsche needs to hope the rout doesn't continue. - A lot is still riding on it, and on one man in particular - Sam Wisnia, the quant tasked with making Deutsche Bank more like Goldman Sachs.
We didn't speak to Wisnia for this article. Nor did we speak to Deutsche Bank, which declined to comment. Instead, we've spoke to people who've worked with Wisnia both at Deutsche and before. As Wisnia completely revamps Deutsche's risk and pricing systems along the lines of Goldman's, where he worked for 14 years, the good news is that he's been hiring. The bad news is that Wisnia's hard to work for - and that questions are quietly being raised about the wisdom of emulating Goldman's historic strategy at a time when the U.S. firm is already shifting to a model more appropriate to contemporary markets.
High IQ, low EQ?
At around 5 foot seven and with unusually long ear hair ("It's like two inches, and he won't cut it because he thinks it's lucky," claims one colleague) and his tie perpetually draped around his neck, Wisnia cuts an unusual figure on Deutsche's trading floor. This diminutive stature is no reflection of his status in Deutsche, however. Hired in October 2014 as head of fixed income and currencies structuring and as head of strategy analytics for the whole of the corporate banking and securities business, and subsequently also made head of rates, Wisnia is man of the moment. Plenty is riding on him.
"Wisnia was brought in by Ram Nayak and Colin Fan to sort out Deutsche's risk and pricing systems," says someone close to the situation, talking on condition of anonymity. "Under Anshu Jain, Deutsche had a sort of start-up mentality," he adds. "- They were going for revenues and growth, and had a piecemeal desk-by-desk pricing system. Nayak and Fan could see that this needed to change."
Enter Wisnia, a brilliant quant who graduated from France's Ecole Polytechnique in 1998 along with Yann Samuelides, the former Goldman partner in charge of the firm's fixed income trading strats business until he left earlier this year. Wisnia joined BNP Paribas out of university and after a couple of years went to Goldman, where he rose to become global co-head of strats.
"Wisnia has always been brilliant - and eccentric," says someone who's worked with him. "When he was at university, Sam went to his tutor and told him he'd begun sleeping three hours a night in preparation for a banking job. When he was an analyst at Paribas, he called out an error in a pricing model during a town hall - this was Paribas, which had the best quants in the world, and he was the most junior person in the room."
Brilliant or not, Wisnia is said to have ruffled feathers at Goldman Sachs and made enemies at Deutsche, where his reign has been marked by various departures. The exits of Chris Guth, Deutsche's former co-head of European rates structuring, Richard Jackson, former head of European flow rates trading, and Chris Yoshida, former head of rates sales are all said to have been Wisnia-related. Tom Hartnett, Wisnia's former co-head of global rates, based in the U.S., also quietly left the bank this January according to his Finra report - an exit that has previously gone unreported.
"Wisnia is a brilliant and fascinating character but a bad manager," says one former colleague. "He sees everything in black and white and has no take on shades of grey. He told a senior person in a management meeting that he was a donkey, and then followed that with, "to call you a donkey is an insult to the donkey." Others who know Wisnia say he's, "incredibly bright and talented, but also incredibly arrogant and with very little emotional intelligence," and that, "He's popular on the desk because he gets things done but if you don't get on with him, you're out..."
This abrasiveness is rumoured to have got Wisnia in trouble with one of Deutsche's clients: last year, Deutsche insiders allege that Wisnia upset a large macro hedge fund.
Is Deutsche copying a Goldman model that's already out of date?
Critics say this sums up the problem with Wisnia's approach: for all Deutsche CEO John Cryan's emphasis on serving Deutsche's top clients under Strategy 2020 Wisnia's detractors argue that the system he's building is less about clients and more about using risk and pricing models to assess the viability of trades on a case-by-case basis. "Wisnia's way of doing things is giving the traders more power," argues one Deutsche observer. "It's taken the emphasis away from sales - his strats are all about working out which trades are viable for the system and less about what clients' need long time." At the same time, they point out that Goldman Sachs appears to be moving in the opposite direction. - As senior figures like Dalinç Ariburnu and other partners leave Goldman's fixed income sales business under a shake-up seemingly engineered by Jim Esposito, Goldman is shifting its fixed income business to a model where it sticks with key clients through thick and thin - irrespective of the profitability of individual trades.
For the moment, however, Wisnia seems to be doing something right. Under his direction, Deutsche Bank's European rates business is understood to have doubled its revenues to €920m euros last year, and Deutsche - unlike many other European banks - is finally making the sort of investment in risk and pricing infrastructure that will allow it to compete with the big U.S. houses. Wisnia's budget is understood to be generous and already he's hired in some good people, including Richard Averill, a former desk strat at Goldman, who joined Wisnia's team unannounced this time last year, along with 10 or so others.
Wisnia needs to hope, however, that his run of luck continues. After last year's doubling of the rates business, Deutsche said its rates revenues were "significantly lower" year-on-year in the first quarter. Coalition data suggests global G10 rates revenues fell 8% in the first quarter. The implication seems to be that Deutsche is losing market share.
As we reported earlier this month, the 'strats business' at Goldman Sachs is in a period of transition. Goldman's trading strats business allegedly cost the firm around €150m ($167m) a year to run historically. As Wisnia seeks to replicate this model across Deutsche, the costs associated with the German bank's nascent strats business are likely to rise. That's fine, as long as Deutsche's strats-supported fixed income traders are making money - but revenues across the business fell 30% in the first quarter.