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CommentP&M Notebook

P&M Notebook: solving the Miz-stery

Mizuho's FIG expansion is back on track.

The Mizuho FIG job has been an obvious vacant seat in the market that has needed filling ever since the bank parted ways with its short-lived previous head of EMEA FIG DCM, AJ Davidson. He joined to start a FIG expansion drive in Europe, having previously worked at RBS and Citi in various capital structuring jobs, but he lasted just two months.

But there has been no indication that the bank is abandoning its plans. Giles Parker came on board from Morgan Stanley in February, followed by Colin Reddy from Bank of Ireland treasury in March, and Daniel Ang from Standard Chartered in July, plus assorted analysts and associates.

Now, however, the bank has hired of Daniel Shore, HSBC’s former head of European FIG DCM, and an early victim of HSBC politics around its restructuring this year.

It is, however, still a curious move from Mizuho. The bank has made no secret of its ambitions, particularly in the US, where it is shooting up the league tables for investment grade corporate DCM, and planting the flag for difficult, lucrative bulge bracket business like tech M&A.

European FIG, though a profitable business, and a core part of the DCM franchise for most large firms, isn’t easy to break into.

At one end, subordinated debt, particularly additional tier one, pays the best fees. Though the product is increasingly standardised, it’s still a lot of work to do a deal, and placing the debt in secure hands is far from straightforward. The bookrunner groups also tend to be huge, since all the major relationship banks need the league table credit, and it’s a perfect opportunity to hand out some reciprocity in the form of co-manager roles. Despite the big syndicates, though, large banks do much of the work in-house, with their own investment bank jealously guarding the business. Mizuho isn’t yet top 25, according to Dealogic.

Meanwhile, some of the most interesting new possibilities in the world of capital structuring have since been closed off by regulators — leaving banks grinding away at filling up their TLAC buffers, rather than daring to dream of exotic hedges to transform reg cap ratios.

At the other end of the market are the secured funding products, like RMBS, covered bonds and term repo. The first two, at least, are specialist areas, which have historically required specialist teams and structurers. It’s possible to sneak on to mandates (especially with a willingness to write swaps cheaply), but it takes serious investment to build a substantial franchise from nothing.

Overall, though, regulation will push more banks into wholesale term funding, and demand more innovative thinking, advice, and structuring work from investment banks. Mizuho is 15th in global FIG, according to Dealogic, and adding a solid European franchise can only help.

Other people news this week includes BNP Paribas’s decision to bring primary markets and credit markets together. Since Yann Gerardin took over as chief exec of the investment bank at the end of 2014, the French bank has been all about various projects of integration.

Equities and fixed income were folded together, with strenuous efforts to marry up trading systems and encourage salespeople to work cross asset classes. Corporate debt products came together in the “corporate debt platform”, high yield and leveraged finance tightened their existing links, and most recently, various secured products have been bundled up together in the “AFS” (asset finance and securitization) business.

Bringing primary and credit together sounds like it should be a huge change, but when you break it down, it shouldn’t make much difference. Martin Egan and Benjamin Jacquard, head of primary debt markets and head of credit markets respectively, get to work together as co-heads of the new structure — but retain their responsibilities for the businesses they run. The Chinese wall continues to run between primary and secondary markets, as you’d expect, so don’t expect many big changes in seating plans or org charts either.

If GlobalCapital had to guess, we’d say it has something to do with the new AFS division. The boss of AFS, Matt Salvner, also holds the title head of primary and credit markets, Americas, and the AFS business crosses primary and secondary markets.

Tying primary and credit together at the top, therefore, stops AFS being too much of a separate silo, and keeps reporting lines neat and tidy.

Elsewhere in bank structure minutiae, David Rothnie examines the business of private equity — and how sovereign wealth funds, family offices, and other investors are increasingly blurring the lines between them.

That’s led to a proliferation of job titles like “head of strategic investors”, and an increasing propensity to cover certain investors from banking units, rather than classically investor-facing markets roles. Anyhow, for more, read this week’s Southpaw.

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