The revelations were, as it turns out… underwhelming. Yes, there’s a big rights issue, hopefully sufficient to take StanChart to the top of the capital pack (though raising equity at 0.4x price to book… ouch). There’s a huge headline job cut figure, (15,000!) monstrous enough to strike fear into the hearts of the firm’s employees, especially the managing director class which will be hit hardest.
But the actual details of the plan are pretty thin on the ground. Winters mostly presented about the need to do more of the things StanChart was good at, less of the things it wasn’t, cut costs, and increase revenues. Worthy aspirations, but if it was easy to do, wouldn’t StanChart already be doing it?
The market didn’t seem to find it hugely reassuring either, though the 1:3.5 rights issue makes it hard to divine exactly what the shares were doing. Macquarie analysts called the plan “rather unconvincing” and said that “it is far from certain where the new capital may go”.
Deutsche Bank’s revamp is the restructuring that keeps on giving. Headline job cuts are even higher than at StanChart, though most of them are in Postbank and technology.
But what the investment bankers will be looking out for is the new management line up, expected early this week. Alisdair Warren, Goldman’s ex-head of financial sponsors, will be joining the bank to run EMEA investment banking from next year, making him co-chief exec Cryan’s highest profile hire so far.
Ups and downs at DB
The week’s announcements should tell us who’s up and down in the new management structure though, with more exits or reshuffles likely from bankers close to the outgoing management team.
Martin Hibbert, who runs CEEMEA debt capital markets, has had his job put at risk, while Dan Pietrzak, who ran the sprawling EMEA structured finance business, has jumped ship to KKR – likely to the former Avoca credit business.
Vaibhav Piplapure had been head of structured and illiquid products at KKR, but returned to his old job running Credit Suisse asset finance in June this year. Going to the buy-side is one thing, but the perils of leaving the market were also on display this week.
Mark Graham, who ran securitization at Deutsche Bank and then at UBS before and during the crisis, has been hired by Lloyds for its secured corporates business. It’s a good gig, and matches his background as head of whole business securiitzation at Morgan Stanley, but it’s a definite step down from being boss of one of the biggest teams on the Street.
So pity the RBS bankers that may not have a choice. This week should bring yet more job losses. The primary markets business is expected to see 100 cuts, spread evenly between corporates and financials. The remainder of the leveraged finance business, which reported to Eric Capp before his departure, should stay intact, but origination and structuring will cross over to the Commercial and Private Banking division, where it will be behind the ring-fence, reporting to Andrew Blincoe.
For the big picture, watch the regulatory screens on Monday morning. TLAC, the rules for big bank failure, capital and loss absorbency, is coming out then, with journalists briefed in advance and the paper going out around 10am London time.
As well as how much loss-absorbing debt banks need, it also sets out where banks need their capital – determining how much it costs to lend through subsidiaries or move capital around the world. GlobalCapital’s take is that the rules will tuen out softer than expected, based on the Federal Reserve’s version of the rules, published last week.
Market jamboree
The Financial Conduct Authority’s announcement of a “UK Primary Debt Group” could also be read as a softening of its touch. The FCA is supposedly investigating the primary markets for evidence of weak competition, or of grubby links between lending, advisory mandates and bond mandates.
But the regulator has signalled a more relaxed tone since the defenestration of chief executive Martin Wheatley in the summer. If it wants to call in the primary debt community for a friendly chat, rather than go through their credentials in detail, then that has to be a good thing, right?
In similar vein, the Bank of England is having its “Open Forum” on Wednesday – the outcome of the Fair and Effective Markets Review. The idea is that senior financial markets people, policy makers and the general public get together for a markets-based jamboree, out of which emerges, it is hoped, better markets.
When the Bank stirs itself, it can pull together a heavyweight line-up – chairpersons of Santander UBS and RBS, bosses of Allianz and Hermes and Insight – but it’s also surprisingly heavy on clergy, and with a penchant for the tabloid press. If you’ve ever thought to yourself “the Daily Mail really understands financial markets”, this could be for you. Needless to say, GlobalCapital was not asked to chair a panel.
Last week also saw a bumper crop of third quarter numbers from investment banks. Whether good or bad, volatility was the theme – worries about China, Volkswagen, Glencore and thin summer markets kept trading divisions on their toes.
But how the banks responded tells us something about their business. For UBS, it was good volatility but at Commerzbank, or at Société Générale, not so much. Banks where primary flow business drives the numbers, or where the packaging and production of structured notes is more important than the volume of shares being crossed, have had a tougher time.
But since the market is prone to freak-outs, and central bank liquidity can’t be there forever (right?), businesses need to be set up to make money on the way down, as well as the way up.