The changes have been in train since before he arrived in early May, and are driven by the combination of global banking (the coverage and advisory business) with capital financing (which housed HSBC’s product lines). Other bankers at the firm are also likely to head for the exit, either voluntarily or with encouragement, as the restructuring beds down.
The biggest departures so far have been corporate finance head John Crompton, and global M&A head Florian Fautz.
Crompton joined HSBC as ECM head in 2010, after a stint working for UK Financial Investments, the government arm holding the bailed-out bank stakes. He switched to become head of corporate finance when Russell Julius returned from Asia last year for his third term as ECM head.
Fautz, meanwhile, was appointed global head of M&A in 2013, after having been head of advisory for Germany. He reported to Spencer Lake, head of capital financing until earlier this year, but HSBC has recently taken on several other bankers with serious M&A cred.
James Simpson joined from UBS in 2014 as co-head of European M&A, while Philip Noblet, who had been chairman of EMEA M&A at BAML, came on board last year as co-head of UK banking.
Johnny Colville, an MD in the sponsors group, chose to make an exit at such a time, but found another gig at US restructuring specialist Houlihan Lokey, which is in the middle of a European expansion drive.
More changes are in the post, GlobalCapital hears – rearrangements of reporting lines, and further jobs cuts.
Some positive HSBC reorg news as well – EMEA markets head Niall Cameron has been handed a broad role sorting out digital strategy for global banking and markets and for commercial banking. Lots of banks are creating “head of digital” roles, as they prioritise cost cutting, clearing up risk systems, and getting ahead of new settlement and trading technologies.
No doubt there will be lots of excitement about the various things blockchain can achieve (along with a modest amount of tie-loosening) but it’s a super-serious business – banks that don’t get their digital transition right will fall by the wayside. The success of Goldman Sachs is in part because of its integrated secDB risk system, which cuts right across the bank.
Meanwhile, firms like Deutsche Bank and RBS, which came out of the crisis with multiple competing incompatible trading and risk systems bodged together, have experienced repeated control failures (and painful restructurings).
Cameron’s new role also allows Patrick George, the global head of equities, to take over as EMEA head of markets — further proof, if proof were needed, of the ascendancy of equities in bank management these days.
Deutsche and Credit Suisse, perhaps anxious to prove they aren’t just leveraged bond shops, also elevated their equities heads to run the whole of markets last year (Garth Ritchie and Timothy O’Hara respectively), while BNPP, since former equity derivatives man Yann Gérardin took over as head of CIB, has also shown a strong tendency to promote equities people to management of the combined markets operation.
Of course, most of the action this week was around the ECB, which, right on cue, confirmed it would start buying corporate bonds next week. While you can, if you wish, read all about the market impact, we wanted to know what it would do to bank profits.
In covered bonds, for example, the market is merrily printing deals at laughably tight spreads, supporting by ECB buying since 2014, but it hasn’t exactly been a bonanza for the banks, with some arrangers shrinking their covered bond teams, even as primary volumes hit highs.
That’s not necessarily the ECB’s fault – the business is evolving to become more like a part of a FIG than a separate product, and once issuers have their programmes in place, the more lucrative structuring mandates fall away.
But some issuers have been declining to pay fees on the portion placed with the ECB – raising the possibility that a corporate debt boom could come to market without much of a reward for the bond bankers making it happen.
There’s a certain logic to withholding payment for placing bonds to a giant, publicly known, price insensitive buyer, but it doesn’t look like corporate treasurers will go that way — because the bond fees are nothing much to do with actually placing the bond.
Instead, most argue that the fees they pay for a capital markets deal are actually a reward for lending and advisory services provided as part of a long term relationship — a charmingly over-complicated arrangement we are sure will please their banks.
It’s the kind of thing the FCA wasn’t completely thrilled with, when it studied competition in investment banking, but the regulator shrugged and allowed debt markets to continue more or less unhindered. It had much more to say about equities, especially the IPO market, and, most bafflingly league tables.
The industry is now, however, on the defensive, and trying to argue that certain of the FCA’s proposals, especially a ban on “restrictive mandate clauses”, are unnecessary. The document is very measured, and a masterpiece of modern lobbying – co-authors from the BBA and Afme have tried to offer regulators positive solutions, and real world examples, rather than the tantrums and scare tactics of early post-crisis regulation.