There’s too much in there to go through it in detail — the key names and structural changes are here, while David Rothnie talked to new banking head Matthew Westerman for Southpaw, and he goes through what it means for ECM, America, and the bank’s long held, but unrealised ambitions to be a big time bulge bracket advisory and M&A bank.
At its root, the overhaul makes HSBC a more conventional beast. “Capital financing”, which housed all of M&A, as well as the other investment bank product groups and most of the group’s wholesale lending, was larger than the equivalent at most institutions, and banking was smaller.
Now the two are combined. Six product groups in capital financing and six client groups in banking become nine groups in the new unit, which Westerman co-heads with Robin Phillips.
The change does eminently sensible things like fold M&A execution, corporate finance, and the separate FIG M&A team into a single advisory business. Sponsor coverage and leveraged finance at least get to sit together, even if they aren’t managed together. There’s a new structured finance unit too — a joint venture between banking and markets.
There are a couple of empty seats in the new structure though — head of ECM and head of M&A — absences all the more apparent since last week’s cuts, which saw corporate finance head John Crompton and M&A head Florian Fautz depart.
Global ECM head Russell Julius, having recently returned from Hong Kong to London, is heading out to become co-head of North America, leaving EMEA head Adrian Lewis and Asia-Pac head Alexis Adamczyk in interim charge.
There’s no global advisory or M&A head, however, with the new combined unit run regionally.
With HSBC apparently gearing up for a further push into advisory (and a management belief that this time it really is different), it’s going to want serious, move-the-needle, bulge bracket talent, in these seats, and it seems likely Westerman will look at Goldman first.
But it’s not going to be all prestige hires and splashing the cash. As the departures of Crompton and Fautz suggest, lots of the changes will involve departures. As duplicative roles in product coverage and client coverage end up in the same unit, bankers will have to leave.
Portfolio financing offers one example (funding purchases of legacy asset books, predominantly by private equity).
This will likely sit within the newly combined structured finance JV, but before the reorg, it could be originated out of at least two different desks in markets, as well as structured finance and special situations. If it’s all in one place, that means job losses.
The new structure is also replete with co-heads, not always the most stable management structure in an investment bank. It’s a natural way to merge divisions — regional head for banking and regional head for capital financing become co-heads — but spells departures in the long run.
BNPP restructures structured
Also overhauling the structured finance business (with a partial accent on the portfolio financing fee pool), is BNP Paribas. US head of primary and credit markets Matt Salvner will run the newly formed “asset finance and securitization” division, with Christophe Rousseau taking over as EMEA head.
That leaves global head of securitization Fabrice Susini looking elsewhere at BNPP for a role. He’s a longtime BNPP banker, having joined the firm in 1997, and he’s a securitization market stalwart, so surely the firm can find something sensible for him to do.
That, too, is likely to be a mixed bag in terms of job losses. The bank wants to win market share in US ABS, global CLOs and portfolio financing, and it isn’t going to do that by chopping headcount. But it is certainly reorganising its London team, and any merging of divisions or refocusing these days is generally a chance for banks to trim the fat.
The whole European ABS market heads out to Barcelona next week for the annual Global ABS conference. Since last year’s event, Barclays, Credit Suisse and Nomura have all slashed headcount on their dedicated European trading desks, so hopefully the recommitment from HSBC and BNPP, even if neither results in an aggressive hiring spree, will bring some cheer to the event.
CRT Capital, meanwhile, is cutting the muscle. It’s not a big shop in London, having only established an office in July 2014, but it’s well established in US secondary markets, and had a nice line in credit here, managed by former Nomura FICC sales head Guy Cornelius.
Now credit in London is closing. The US credit business had already gone, sold earlier this year to Cowen & Company, leaving the firm, originally named for “Credit Research and Trading”, conspicuously light on actual credit people.
Among smaller shops, Berenberg appears to be on the march. It’s the world’s second oldest bank (As Monte dei Paschi somehow keeps staggering on, it remains first, as journalists are obliged to note at first mention) but somehow it never had a US equity underwriting licence.
Now it’s applied for one, hiring James Ramp to be the inaugural head of US ECM.
Other moves this week include Soc Gen appointing Felix Orsini to run public sector origination, alongside his existing role as co-head of corporate origination. It follows cuts to the bank’s public sector franchise (six or seven bankers in Paris, as part of broader markets job cuts), and the bank deciding to drop its Gilt-Edged Market Maker status. Zenia Bignier, the former head of public sector, has left the bank.
SG also took the opportunity to confirm that Eric Meunier was taking over FIG DCM, as GlobalCapital reported two weeks ago.
In regulation, this week has been all about lobbying and posturing, with a certain amount of stalling to boot.
The EU delayed its non-cleared margin rules for derivatives until the middle of next year – welcome from operational perspective, easing the burden for markets divisions and their lawyers, who are already working flat out, but making global coordination that bit harder.
The securitization industry also had a bit of a fright when Paul Tang, the Michael Lewis-loving MEP who is the rapporteur for the “simple transparent and standardised” rules in Europe, proposed that risk retention jump from 5% to 20%.
It’s probably just an opening bid, rather than a firm proposal, but it could still break the industry’s economics — and will doubtless raises hackles when Tang addresses 3000 securitization professionals in Barcelona next week. It’s all the more shocking because risk retention has been on the books in Europe since 2012. It’s among the least controversial elements of post-crisis framework, and it’s widely felt to be liveable and function well.
*HSBC isn’t the biggest bank in the world by assets or by market cap, but it is the firm highest up in the “G-SIFI” bucket.