As if the heads of Europe’s banks did not have enough on their minds, they now have a resurgent Bank of America Merrill Lynch to cope with. "It’s on fire in Europe at the moment," said a senior banker at a rival.
The returning dominance of Wall Street banks is a well-recognized trend, but few US firms are taking such a bullish view on Europe, the Middle East and Africa as BofA Merrill.
At a time when rivals are slashing balance sheet to European clients, it is adding risk-weighted assets in corporate and investment banking in Europe, hiring managing directors and even luring back former staff. "It’s being very aggressive with its balance sheet," the rival added. "And it’s paying off."
The firm has some catching up to do across EMEA. The integration of Merrill Lynch — the hub of what is now BofA Merrill’s European operations — was a bruising experience that sapped morale and triggered dozens of departures.
But the firm has now rebuilt the EMEA team, led by Diego De Giorgi and Bob Elfring. The two have made leveraged finance and M&A strategic priorities as the bank aims for a top-three ranking across all products in the region.
International expansion has been a mantra of the CIB division since 2010, when Tom Montag — who was then-president of its global banking and markets division — declared that Europe was the "battleground" as the firm sought to grow market share outside the US.
Montag, now co-chief operating officer of Bank of America Corp, said he wanted to double lending in Europe over five years, an initiative that BofA Merrill looks on course to achieve.
Its European drive is coming from a position of global strength. It was ranked second in global investment banking fees during the first quarter of 2013, boosted mainly by its presence in the US, where it was ranked number one, with a market share of 11.7%.
AGGRESSIVE EXPANSION
But with fee growth flat in EMEA, the firm knows the only way to make progress is to take market share, and that means pursuing an aggressive approach. Since 2010, the bank has increased its market share of EMEA investment banking fees from advisory, equity capital markets, debt capital markets and leveraged finance by 2.3%, boosting its ranking from 11th to 4th this year.
Since January, BofA Merrill has been lead financier on the region’s three biggest acquisition finance deals — Virgin Media’s $4.67 billion leveraged loan to finance its acquisition by Liberty Global, joint lead arranger of €3.3 billion of financing to fund the $8.4 billion buyout of Dutch retailer Master Blenders by JAB Holdings last month, along with a lead arranging role on the $4.07 billion buyout of German company Ista International by CVC Capital. The bank also acted as M&A adviser to CVC and JAB.
Performing better in leveraged finance has become a priority in improving returns and gaining market share.
"We are ruthlessly committed to cost reduction, which is one driver of return on equity," said one banker at the firm. "But another is the return on our assets, so we are putting balance sheet to work where we can get the most return. We are deploying capital, but not by simply providing $1 billion loans to triple-A corporates, because they are the firms that usually need our help the least."
BofA Merrill has built up its presence in leveraged finance with the appointment of Toby Ali, who joined in November as head of EMEA leveraged finance origination after seven years at Credit Suisse.
In January, BofA Merrill also combined the junior resources across its financial sponsors group, run by Rob Firth, and its leveraged finance capital markets business, which is run by David Ross.
That move provides further evidence of the way in which BofA Merrill has fostered integration and co-operation between its divisions following the merger of its corporate and investment banking divisions in April 2011.
The appointment of Ali is also part of a flurry of new arrivals that underline the firm’s commitment to building up its coverage model across EMEA. In August Luigi Rizzo, a former partner and colleague of De Giorgi’s at Goldman Sachs, will join as head of M&A for EMEA.
Rizzo’s impending arrival follows that of Arshad Ghafur, who joined in March from Nomura as head of its Middle East and North Africa unit, and Joaquin Arenas, who arrived in May from Morgan Stanley as head of Spain and Portugal.
Another new face is Alexander Pertsovsky, former chief executive of Renaissance Capital, who is now running BofA Merrill’s Moscow operation.
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