THE NEW YEAR may have started out with the same set of market-related themes that kicked off 2014, but banks have been wasting little time in their continued quest to fine-tune, sharpen, prioritise, optimise and capitalise ahead of a year replete with uncertainty and latent anxiety hotspots.
For those of you who spent the holiday period on the beach, on the slopes or – like me – on the sofa, here’s a potted summary of what went down over the period and into early January to help you out if your boss asks you for a run-down.
Most recently, we saw Standard Chartered shutter its cash equities, research and equity capital markets businesses – for 200 job cuts and US$100m of cost savings in 2016. My reaction, along with that of many others, I suspect, was: “They had an ECM business?” Potentially a little harsh, but StanChart just isn’t an equities and advisory house. Mike Rees’s decision to get out of a business that rarely makes money for anyone and one at which you kind of suck to boot strikes me as a sound one.
My only question about the closure of equity research is why the bank continued to hire when it knew it was going to close it down. Stewart Callaghan jumped from Nomura in December to be head of equity research. Announcing Callaghan’s hire, Pam Walkden, group business head, regions, said: “Stewart’s deep experience makes him an ideal choice to lead the development of our equity research platform, as we continually strive to provide ever more insightful and relevant stock research”.
And when the bank hired four cash equity salespeople in October, Tim Andrew, head of cash equities said: “These appointments demonstrate the bank’s commitment to strengthen our equity franchise on the back of client demands”. What a load of old cobblers. And then people arrive for work in January to find they’ve been locked out? Pathetic.
Banks have been wasting little time in their continued quest to fine-tune, sharpen, prioritise, optimise and capitalise
ELSEWHERE, CITIGROUP DEEPENED its commodities gamble, acquiring Credit Suisse’s trading books across base and precious metals, coal, iron ore, freight, crude oil and oil products as well as US and European natural gas. That was just weeks after it bought Deutsche Bank’s energy and metals books. With WTI trading at US$48-and-change, you’ve got to wonder about the timing here …
I was taken with the Berenberg/ BayernLB tie-up in financing and investment banking. This doesn’t play into a global or necessarily even a Europe-wide theme, but it looks good on paper in a German context. I wouldn’t call the arrangement “ground-breaking” or “revolutionary” or one that “will permanently change the financing and investment banking landscape in Germany” as the slightly gushing announcement did, but it does give each side something they don’t have.
The centre of gravity of German capital and bank markets is firmly anchored around the Mittelstand so I expect the Hamburg-Munich tie-up to be accretive for both parties. BayernLB has the SME lending piece as a core skill while Berenberg has built a decent ECM business off the back of its solid equity research platform.
The same platform, in fact, that maintained its sell on Santander, in the news this past week for its €7.5bn drive-by capital increase. “[Santander’s] strategy is focused on scale and growth (albeit organic now), macro risks remain in Brazil and Spain, and capital is still inadequate. With management targeting 12%–14% RoTE, a valuation of 1.4x P/TNAV discounts too low a cost of equity. Our Sell case remains,” Berenberg analysts wrote Friday.
THAT’S DESPITE LIGHTNING moves by new chair Ana Botin, who I’ve no doubt will continue to shake things up. Weeks after taking over, she ousted CEO and 23-year Santander man Javier Marin in favour of CFO Jose Antonio Alvarez. A consequent domino effect of appointments saw Jose Garcia Cantera move into the CFO chair from his former position as head of global banking and markets, while head of GBM UK Jacques Ripoll stepped up to become divisional CEO.
Botin was said to be interested in Portugal’s Novo Banco, the good bank created from the ashes of the Banco Espirito Santo collapse, so Santander’s acquisitive core remains intact. The Portuguese government is keen to conclude a quick sale, so let’s see what happens.
Espirito Santo Investment Bank was of course sold in December to Haitong Securities for €379m in an impressive show of international force by a Chinese securities firm and one that goes way beyond CITIC’s acquisition of regional Asia investment bank CLSA from Credit Agricole in 2012. The acquisition gives Haitong 1,000 professionals spread throughout offices in Lisbon, London, Edinburgh, Madrid, Dublin, Paris, New York, Mumbai, Hong Kong, Sao Paulo, Warsaw, Luanda and Mexico City. What it does with its new-found assets remains a fascinating unfolding story.
And talking of senior management domino effects, Deutsche Bank’s impending 2015 line-up is likely to be tested as the outcomes and impacts of various regulatory investigations (most notably FX) wind up and test the group’s litigation reserves.
If you recall, Marcus Schenck jumped from Goldman to become CFO after the AGM on May 21. As a result, Stefan Krause is moving to head of strategy and organisational development; COO Henry Ritchotte is additionally taking on the bank’s digital agenda (whatever that is); while head of audit Christian Sewing is joining the management board with responsibility for legal and incident management. Europe ex-Germany/ UK CEO Stephan Leithner will co-ordinate the next phase of the bank’s cultural change programmes.
This sounds an awful lot like succession planning to me. The results of the bank’s full-service investment banking gamble will come into sharp relief this year as Strategy 2015+ reaches a critical phase. It could potentially be job-threatening for co-CEOs Anshu Jain and Juergen Fitschen.
I’ve got a feeling succession will remain a major theme in investment banking. Welcome to 2015. Or as one jaded individual told me: “2015? You’re welcome to it!” Charming.
