CAN INVESTMENT BANK reorganisations in and of themselves lead to a durable step-change in the fortunes of a given institution? As in secure a bigger portion of global wallet share and generate a more substantial and sustainable revenue stream?
Or is the pecking order – even with an eye on the vagaries of what can be viciously cyclical markets or markets subject to disruptive events – just a function of another bank’s misfortune or decisions made by competitors? With apologies for engaging in a little reductio ab absurdum, reorgs tend to be driven by a desire to arrest and turn around areas of under-performance in areas that banks continue to believe are worth staying in.
Or by a desire to super-charge areas of acceptable performance but where banks perceive the upside rewards justify the efforts. Or, most dangerously, by a desire to move into areas banks perceive are going to become big and where they want to garner first-mover advantages.
BUT LET’S BE frank: reorgs rarely amount to anything more than forcing broadly the same set of people you had before run around the track in a slightly different direction, maybe with a different team manager or where the rules of the game may have altered.
Even if you splash the cash and retool your talent bench, how long does it take for your motley crew of waifs and strays to gel into a force imbued with and empowered by whatever culture the brand wrapper dictates? Actually, can culture and institutional history act as progress inhibitors?
And aren’t bank reorgs anyway always book-ended by politicians and regulators at one end, and cookie-cutter management consultants at the other, with banks merely serving as fodder in the middle, with the joke being banks actually believing their own spin?
So many questions. That isn’t meant to sound as cynical as it might, so let me put it this way: I’ve been observing and commenting on bank strategy pronouncements now for decades. Has the pecking order of primary investment banking actually changed since the 1980s? Hardly. Even with the hundreds of takeovers and mergers we’ve seen, the industry hotshots are more or less the same institutions. I think I can safely say we haven’t seen a single disruptor.
I was thinking about this when HSBC’s investment banking reorg came out. None of the above is targeted at HSBC but it did make me wonder if Matthew Westerman and Robin Phillips genuinely, hand on heart, are taken by a profound sense of latent future achievement that will see HSBC clamber up the slippery slope of investment banking wallet; that vaunted slope littered (excuse the strangled metaphor) with the bleached bones of countless other pretenders.
reorgs rarely amount to anything more than forcing broadly the same set of people you had before run around the track in a slightly different direction, maybe with a different team manager
THERE WAS NOTHING in Phillips’ and Westerman’s 2,500-word two-track joint memo extravaganza outlining the new banking structure at the world’s local bank that you could react to with a sharp intake of breath. It was what everyone has been doing or trying to do (there’s no such thing as a unique structure these days).
Their memo had all of the buzzwords: closer engagement, better alignment, seamless coverage, seamless advice, optimising capabilities, optimising partnerships, becoming agile and holistic, generating synergies, intensifying focuses, transformation, co-ordinated approaches, capitalising on opportunities, making best use of competitive advantages, maximising efficiency and effectiveness.
I counted 44 name-checks of individuals tasked with making all of the above happen. But what my preamble was really getting at is this: it’s still HSBC. Will any of the above – genuinely – change the way the client sees HSBC and compel them to appoint the bank on business it wouldn’t have previously considered them for? Can the bank morph from balance sheet-led universal bank to advisory/OTD powerhouse, for example? If balance sheet begets business, why bother changing?
In the bit of the memo that talks about capital markets, we’re told the end-game for DCM is to “seek to maintain its leadership position in league tables, with a special focus on growing market share whilst improving profitability”. That’s hardly revolutionary. But then again HSBC is already a top five DCM house in most major markets and higher in certain niche markets so the net benefits of the reorg are limited.
But they’re also limited in ECM. The aspiration in Westerman’s home market isn’t at all ambitious. HSBC doesn’t currently have leadership positions in equity capital markets. All it wants to do here is grow market share across its markets, “complementing its strong position in North Asia and MENA with gains in other regions … improving our share of economics on deals and increasing the number of joint global co-ordinator and joint bookrunner roles”.
And to “seek closer engagement with global markets with the aim of improving our speed to market and increasing our share of block trades”. Where’s the ambition to grow into leadership positions in league tables à la DCM on the back of the new integrated super-machine? It’s all a bit flat.
We did learn one thing, though: HSBC continues to pay heed to league tables. The mantra had been that IBs no longer care about league tables but want only to provide optimal service to core clients. As purveyors and publishers of league tables, that’s music to our ears. Thanks guys.
