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P&M Notebook: Holiday slumber

JP Morgan announces an exciting new initiative — but everyone who knows what it’s about is on holiday.

GlobalCapital started last week with a cryptic announcement from JP Morgan. Ryan O’Grady, the co-head of syndicate, was going to be heading a new team looking after “credit product development”, with staff snaffled from the broader “credit markets” operation.

It was a head scratcher, particularly as everyone who seemed to know about it (including O’Grady himself) was on holiday. “Credit Product Development” sounds closest to hybrid capital structuring — that’s what the “new products group” at Citi and BAML do. And O’Grady is a FIG banker by background. But JP Morgan already has people doing that, and it’s not an obvious move from the top of the syndicate desk.

It also sounds like it could be about bespoke derivative sales, or ALM advisory, at a push, but again, not the most obvious move for a head of syndicate. Not that it’s a move, exactly. O’Grady keeps responsibility for “international syndicate” (syndicate outside North America), though all his direct reports get a line into Bob LoBue, his co-head, as well.

The mystery will surely be solved soon, but can we take this opportunity to put in a futile request for clarity in investment banking job titles? There aren’t that many different ways to slice the businesses that investment banks do — how about every institution starts calling them the same thing?

Other than that, there’s been little movement on the Street, with half the capital markets on holiday. One firm we spoke to had charmingly left the most junior member of the desk to do nearly all the week’s business, while senior members spent time on the beach, or in the office, but admiring the bewildering array of talents on display in Rio rather than the rather underwhelming flow of capital markets transactions being priced.

ING hired a couple of ECM bankers from Dutch rival ABN Amro, while Deutsche Bank moved one of its salespeople over to syndicate, with James Gray replacing Bilal Husain as head of European ABS syndicate.

With not much moving in the market, we took the time to dig into some data — to what extent do the biggest DCM banks in each country match up with the top primary dealers? A good primary dealership cross-fertilises all the bond business from a country, and helps banks capture more hedging and switching flow. It’s certainly not the most important factor in winning mandates (even in public sector DCM), but it helps.

Other, larger industry trends include the emergence of an activist investor in Morgan Stanley, in the shape of ValueAct Capital, which revealed a $1.1bn stake on Monday. It doesn’t look like ValueAct is demanding headline grabbing course reversals, like Knight Vinke’s call for UBS to sell its investment bank, but is instead asking for more of the same, but better.

Still, with plenty of other investment banks still working through the early, painful parts of strategic adjustment, and their shares trading at bargain basement prices, the emergence of activists in banks could spell yet more pressure for management teams.

It’s unlikely to change the game for any IBs struggling to make ends meet, but this week also saw a new opportunity out of Saudi Arabia. The country’s restrictive stock market has been gradually opening, with foreign investors allowed to buy from last year (following a draft published in 2014).

But now it plans to open up IPOs to foreign investors as well, starting in January. The rest of the Kingdom’s “internationalisation” agenda is supposed to be done by the end of 2018, but the shift in stance on IPOs means that any privatisations can be done on a proper market basis, rather than handing Saudi elites preferential access to an underpriced issue.

The Tadawul bourse doesn’t see a huge flow of new listings — three IPOs this year, according to Dealogic, but the prize, of course, is Saudi Aramco, the most valuable firm in the world. Some 5% of the oil giant could be placed, which would mean an offering of more than $100bn, perhaps with a triple listing. There’s still a long way to go before the deal is ready for marketing, but a more open market in its home jurisdiction is a good start.

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