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Illustration: Kevin February |
Li Ka-shing, arguably the most important investment banking client in Asia, had for many years been considering a rationalization of his myriad business interests in Hong Kong and beyond.
When he finally pressed the button to proceed with the reorganization of Cheung Kong and Hutchison Whampoa, the $81 billion deal would prove to be one of the biggest of 2015.
Li and his senior management eventually put three banks on the ticket. One was involved from start to end, advising on a hugely complex restructuring that, taken in the wrong direction, could easily have fallen foul of regulators and stock exchange rules in Hong Kong or risked damaging the fortune that Li had built up over six decades. It was, even competitors admit, this bank’s deal.
Another firm, with close ties to CK/Hutch, came in some way through the process, mostly because the lead bank had committed all the financing it could to the deal. The third was forced frantically to scramble to get on the deal at the very last minute, leveraging its long-standing relationship with Li’s business to at least get league table credit, if not much in the way of fees, and avoid the embarrassment of being left off one of the biggest deals in Hong Kong’s financial history.
The three banks involved were Bank of America Merrill Lynch, Goldman Sachs and HSBC. What role did the latter have? The last-minute relationship role – given its base in Hong Kong and long track record of lending to Li’s businesses? No. The position dictated by the need for more financing, where HSBC could bring its $2.4 trillion balance sheet to bear? Wrong again.
HSBC, not Goldman, CK/Hutch’s traditional go-to investment bank, was the sole financial adviser throughout. Goldman was the firm added to the ticket at the last minute.
The CK/Hutch deal, closed in June last year, was a watershed moment for HSBC’s global banking and markets (GB&M) division, in which its investment banking operations are housed. It showed that a decade-long, steady build of its advisory and financing capabilities was finally coming to fruition.
As China’s role in global finance continues to grow, our presence there is extremely important. At the moment, some banks question our relevance in the US. I can imagine a day soon when, in global banking terms, people are questioning the global footprint of US banks because they are not sufficiently present in China – Stuart Gulliver
It was a cathartic moment for many of the people working in GB&M, opening their eyes to what was now possible for the bank. It certainly raised eyebrows at HSBC’s competitors, who for many years had defined and derided the bank for what it could not do – advisory and equity capital markets, as well as its lack of a big operation in the US – when it came to assessing the top global firms in investment banking.
And, increasingly, it looks like a turning point for the business as a whole. Since CK/Hutch, HSBC is winning more and more high-profile mandates. For example, it is the lead financial adviser on one of the biggest announced cross-border M&A deals of 2016, ChemChina’s $43 billion takeover of Swiss-based Syngenta, which is also the largest overseas acquisition by a Chinese company to date.
HSBC also played a leading role in the sale of Tesco’s $6.5 billion South Korean business HomePlus to a local private equity consortium. Another deal won in HSBC’s Asian heartland, its competitors might argue. But that is not quite true.
HSBC’s client was Tesco. The mandate actually came from that well-known emerging market of Welwyn Garden City in Hertfordshire, England – Tesco’s global headquarters.
Such deals, and many others over the past 12 months, are important for HSBC’s reputation in the industry as well as the GB&M division’s bottom line. But they remain a relatively small part of a global business that has often been misunderstood and under-appreciated by the industry as a whole, if not by HSBC’s clients.
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Samir Assaf, HSBC |
Global banking and markets, under the leadership of division CEO Samir Assaf, is a strong and diversified business. Its markets division is one of the best in the world. It has never been overly reliant on volatile fixed income markets, is strong across foreign exchange and rates, and has a better equities division than it is given credit for. Despite its lack of a domestic US bond business, HSBC is a debt house to be reckoned with in all the markets in which it chooses to compete, especially in Asia and the Middle East, but also in Europe and Latin America. It has a market-leading business in asset finance, notably real estate, and a growing presence in strategic equity solutions. It has, by any measure, one of the top three global transaction services businesses, with a network that captures around 95% of global trade flows.
Perhaps most importantly of all, there has been a fundamental shift in culture at HSBC. What was once a bank riven by silos and fiefdoms is now, arguably, one of the most joined up firms in the industry. In particular, the collaboration between GB&M and the traditional power in the bank, commercial banking (or CMB as it is known internally), has been one of the great achievements of Assaf and his group CEO Stuart Gulliver. That collaboration is making HSBC a growing force in areas such as high-yield debt, M&A and equity capital markets.
“The industry is moving more towards the model we have run for a decade now,” says Assaf. “We are trusted by our clients. We do business with people and institutions we have long-term relationships with. We have the balance sheet, liquidity and intellectual capital to support them when they need it. And we can demonstrate a consistency of results.”
The proof of HSBC’s model can be seen not just in its rankings or in its deals, but also in its reported numbers. In 2015, GB&M posted a profit of $7.9 billion, more than 30% higher than 2014. Revenues were up 7%. Which other globally relevant investment bank could say the same in the difficult markets of last year? Client-facing revenues in GB&M have grown at a compound annual rate of around 6% between 2011 and 2015, at a time when global industry revenues have fallen around 11%. That alone makes HSBC a deserving winner of Euromoney’s award for the world’s best investment bank this year.
But the story and HSBC’s credentials go deeper than that. Through a decade of outrageous swings in the fortunes of global investment banks, HSBC is reaping the benefits of sticking to its strategy.
“We’ve been consistent in a way that very few other global banks have,” says Gulliver. “There’s a big advantage in this; it means our clients know who we are and know we are there for them. From a cultural point of view, it’s been important internally as well.”
Rewind
That performance has been a decade in the making. And to understand where HSBC is today, and how far it has come in investment banking, it is necessary to rewind to 2006.
That was the year Gulliver became sole head of global banking and markets. It marked two other important events: the departure of his previous co-head, John Studzinski, who had expensively tried but failed to build a global advisory business almost from scratch; and it was the year that the folly of HSBC’s acquisition of US mortgage lender Household, and the billions of dollars of losses that accumulated within it and HSBC’s overall US business, started to kick in.
Against that background, Gulliver put in place a strategy that to this day remains at the heart of HSBC’s offering; one that reflected the bank’s strengths in Asia and the Middle East, aiming to introduce emerging market clients to the developed markets and vice versa. It emphasized HSBC’s network, which sits above many of the global trade and capital flows.
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Stuart Gulliver, HSBC |
“We decided to focus on the things that no one could challenge: in essence, that we were an emerging market bank and that we could finance clients,” says Gulliver. “That meant we should focus on areas such as debt capital markets, trade finance, lending, cash management and custody.” GB&M began to push ahead in all those areas. It brought in a more systematic approach to capturing revenues in key trade and capital corridors, forcing country heads to think not only about what they were doing with clients domestically but also how could they serve clients in their growing cross-border businesses.
But Gulliver was frustrated in his efforts to get HSBC to do more with its clients – not so much in GB&M, but in the commercial bank.
Here was a group of clients that a senior member of GB&M’s team describes as a honeypot for the bank. But from 2006 to 2011, senior management in the CMB division were the bear that wouldn’t share. People close to the situation at the time say there was an element mistrust of the motives and compensation of Gulliver and his investment-banking colleagues.
That led to a lot of frustration. One HSBC banker says: “It was a ridiculous situation. We were good at DCM in Asia. We had deep banking relationships with a lot of growing Asian corporates. But every time they came to the high-yield markets, they chose Morgan Stanley or Goldman Sachs, who’d never had a relationship with them in the past.”
When Gulliver became group CEO in 2011, he finally had the chance to push commercial and global banking closer together. In part, he did so by linking the compensation of Assaf, his successor as GB&M chief, and Simon Cooper, then head of CMB (who recently left to become head of the commercial and investment bank at Standard Chartered), to revenues that came from collaboration between their divisions.
But it did not happen overnight. Long-standing resentments still existed in the aftermath of what one banker describes as a turf war. While the green shoots of collaboration could be seen in Asia in particular, the businesses were not coming together quickly enough.
A crucial turning point came when Assaf created the capital financing group within GB&M in 2013. Under former global markets head Spencer Lake, the division was created to bring the disparate financing products in banking and markets under one roof. It would also be group agnostic about whether its business came from clients in the global banking, markets or commercial banking divisions.
“Having all of our primary products in one place created real momentum in the business,” says Lake. “We weren’t just talking to clients about lending any more, we were talking about advising, financing and hedging. It helped create a real identity across our corporate finance business. And the buy-in and collaboration with our partners in CMB was crucial. Quickly we began winning multiple mandates in areas like high-yield, M&A and equity capital markets.”
The proof came in the numbers. Financing and advisory revenues from CMB clients jumped 60% in the first full year of the capital financing group in 2014 and rose again by about 30% in 2015; 70% of ECM revenues in Asia came from CMB clients.
At the forefront
Last year was the time that it all came together. HSBC’s performance was not just about those big, high-profile M&A mandates in 2015. It showed that HSBC’s model worked even in difficult markets. The bank built on its competitive advantages, especially its international connectivity that helps customers capture trade and growth opportunities. Its focus on providing clients with strategic solutions thrived in the low volatility, low interest rate environment.
The bank was at the forefront of many of the important new trends in global finance, notably the growth of renminbi capital markets, sustainability and green bonds. It reaped the benefits of improved relationships in core areas such as sovereign wealth funds and financial institutions.
It moved its crown-jewel corporate franchise forward, having built specialists in important sectors such as energy, chemicals and telecoms. It was an increasing presence on important deals in the equity capital markets. It established the firm as the leading provider of real estate finance across Europe, the Middle East and Asia.
In Asia in particular, the business was booming. (HSBC also wins Euromoney’s award for Asia’s best investment bank for the first time this year.) The collaboration concept had been bought into early by Asia-Pacific GB&M head Gordon French and his CMB counterpart Noel Quinn, who recently replaced Cooper as global head of the commercial bank. Capital financing, run by former Asia debt capital markets head Stephen Williams, was at the heart of that success in Asia.
Yes, we can be more forceful with clients in making sure that we get the right role on their deals. But we’re a relationship firm. We’re not just there for the deals – Matthew Westerman
The growth in the bank’s advisory business in Asia had a profound effect. Where once HSBC would just be brought in for the financing, as adviser it not only naturally captures more fees on a deal, but is also integral to the process of allocating economics. Bankers say this has materially changed its overall wallet as much as it has volumes.
But even in HSBC’s most important market, success did not come easily. “We’ve not got to where we are today in Asian investment banking by accident and it wasn’t just in one year,” says French. “It required rigorous execution and blood-and-guts discipline.”
French talks through some of the deals that HSBC has done over the past year. “Look at our role in Biostime’s A$1.67 billion ($1.23 billion) acquisition of Swisse Wellness,” he says. “We would not have been sole financial adviser in the past. We would have just had a lending relationship through CMB. Take AAG Energy Holdings’ $295 million IPO – that began as a lending relationship, we were joint global coordinator. Now we’re part of ongoing dialogue over event-related business. And don’t forget that ChemChina, our biggest M&A deal to date, was originally a CMB client.”
It was not just happening in Asia. HSBC’s Middle East franchise is the clear leader in the region. In Europe and Latin America, its performance was also improving. In HSBC speak, the bank was capturing value from its network, delivering its network to its customers and connecting those customers to opportunities.
Reorganization
So when Assaf announced a reorganization of the global banking team in February this year, it did not just take competitors by surprise, it shocked many senior investment bankers at HSBC as well.
After three years in which it had helped transform both the internal culture of HSBC’s investment bank, as well as the business that it did with clients, capital financing was merged back in to the global banking division, while several hundred of CMB’s biggest clients were transferred into the newly enlarged group. Robin Phillips, global head of banking, was joined as co-head by a rare senior external hire, Matthew Westerman, a 15-year veteran of Goldman Sachs, who had run that firm’s global ECM division before spending four years in Asia as Goldman’s regional head of investment banking. Lake was moved into a vice-chairman role.
That headline announcement then led to one of the most extensive root-and-branch reorganizations of divisional structure and business heads that Euromoney has seen. The execution may have been complex, but according to Assaf, the theory behind it was simple: products had been brought under one roof, now coverage needed to be aligned with that model.
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Robin Phillips, HSBC |
When Euromoney sits down with Assaf, Phillips and Westerman in early June, they are just coming to the end of a global series of town hall meetings designed to introduce the new global banking structure to staff. Phillips, remarkably fresh-faced after an overnight flight, says: “At the town halls, we congratulated our teams on their success to date, but spent most of our time talking about how we can take the business to the next level. The best changes take place not as the result of a crisis, but when you are in a position of strength.”
Assaf is keen to reinforce the message that the change largely means business as usual. “Internal changes are not important to clients – the most important thing is that your proposal to clients is at least as strong or stronger,” he says. “We are not changing our model. Our franchise is the same. We’re adapting our coverage and primary products so that we can better support those clients.”
The upheaval has inevitably unsettled many inside HSBC. Some bankers sound an alarm over the proliferation of co-heads at the top line of multiple business divisions, something that often fails to deliver. Such root-and-branch changes could affect the bank’s newly-found esprit de corps. And there is, of course, a risk that the old antipathies between CMB and global banking flare up, especially as in the restructuring some of the biggest and most profitable CMB clients were moved over to GB&M.
But insiders say the structural and cultural shift is now embedded; that new CMB global head Quinn was one of the biggest advocates of the benefits of collaboration when he ran that business in Asia; and that the business benefits to both sides of the bank are clearly evident.
Assaf will also hope to drive cost savings and efficiency gains as part of the new global banking structure. As its success grew, the splitting of global banking and capital financing had become unwieldy and costly. Success often had multiple fathers, with different divisions wanting a cut of the revenues.
That renewed focus on costs is evidenced by the hiring of Andre Cronje as COO of GB&M, reporting directly to Assaf. Cronje was highly regarded at his previous employer, UBS, for having transformed the cost infrastructure at the Swiss investment bank.
HSBC has also embarked on a stringent reassessment of its risk-weighted assets at group level and also in GB&M as part of a two-and-a-half year programme. The bank has made good progress. From the fourth quarter of 2014 to the same period a year later, client-facing RWAs fell from $371 billion to $315 billion. GB&M has already gone a long way towards Assaf’s aim to reach client-facing RWAs of $280 billion in 2017.
One route to RWA reduction is to stop committing capital to unprofitable clients. The process started some time ago. By the end of last year GB&M had cut its commitments to around 20% of existing clients. The remainder are an even split between corporates and financial institutions.
“You can tell a client that you’re no longer committing capital to it,” says Phillips, “but previous commitments may have been for five years and still have three or four years to run before they come off the books.”
Certainly Assaf will not be rushed. “There will be no fire sale,” he says. “That’s not in the best interests of shareholders.”
In the longer term, committing less capital should, on a like-for-like basis, hit revenues – they may not have been profitable, but they still came in on the top line. The key, therefore, is to replace those old revenues with new, more profitable ones.
New revenues
The search for those new revenues is central to the reorganization of global banking and the hiring of Westerman from Goldman Sachs. Westerman talks about creating scale and alignment. That is what HSBC has clearly done in the debt capital markets. He now wants to match that in equity capital markets, for example.
“We’ve already built good ECM franchises in Asia and the Middle East,” says Westerman. “We’re making progress in Europe, especially in the UK, France and Germany – we were joint bookrunner on 16 European IPOs last year. But we need to move up the hierarchy and make the most of our distribution and capital markets capabilities.”
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Matthew Westerman, HSBC |
The accepted wisdom in equity markets is that unless you are big in the US, you are nowhere. Westerman knows HSBC is not about to jump in a DeLorean back to 2003 and try and compete with the US bulge bracket again. But, he says: “We have more dedicated US-based sales people selling foreign stocks to clients in the US than many other firms – significantly larger than some bulge-bracket equity franchises. We are strong in socially responsible investing, which now accounts for about a third of all institutional money. We don’t want to be everything to every man. But we have the building blocks in place to be competitive, and any incremental investment will be small and self-funded.”
Hiring Westerman should certainly give a new impetus to parts of the global banking business. He may exude bonhomie and quick wit, but there is a steely edge to him. And as a former head of ECM at Goldman Sachs, he has a reputation for delivering and executing good deals for clients. As one colleague says: “If you’re on an IPO pitch, and Matthew is in the room, you have immediate credibility.”
He also spent a number of years in Hong Kong and knows many of HSBC’s most important clients in Asia – as does his co-head Phillips, who has also spent time in Asia in a senior client-facing management role.
“Our aim is to upgrade the relationships where we are a trusted universal banking partner,” says Phillips. “For example we have some great relationships in transaction services. These are valuable relationships in their own right. We need to be involved in more of the activity that stems from decisions in the boardroom. But CFOs are much more active in decision-making in areas such as structured trade finance. We are really stepping up that push.”
In M&A, the bank is getting better at turning financing relationships with clients outside Asia into advisory mandates. Holcim is a good example. Having been a long-term balance sheet provider to the Swiss cement company, last year HSBC won the mandate to dispose of $7.4 billion of assets in 11 countries after its merger with Lafarge.
To move to the next level in M&A, however, HSBC will need to improve coverage. In some industries, what bankers call ‘content’ – the intimate knowledge of the industry and strategic opportunities – is far more important than finance.
One sector where HSBC has already built this is in European telecoms, where it has advised and financed a series of deals for the likes of Bouygues and Telefonica. There is still work to be done in areas such as healthcare and pharmaceuticals; for example HSBC is understood to be financing Bayer’s pending $62 billion takeover of Monsanto, but it does not have an advisory role.
But, remembering the mistakes of the past, HSBC will not lose sight of its core strategy. “We’ve reached the point where we have excellent sector coverage and M&A content,” says Gulliver. “And we have some very good investment bankers. But importantly we continue to lead with finance. We should not forget that a $2.5 trillion balance sheet is a big competitive advantage.”
Of that balance sheet, Asia is by far the largest part and it remains HSBC’s strongest suit. So much so that, despite the growth of its business elsewhere, Gulliver famously executed a ‘pivot to Asia’ in terms of the group’s global business strategy last year.
In global banking and markets, HSBC is benefiting from the withdrawal of a number of international banks, such as Barclays, Deutsche Bank, RBS and ANZ. “If you were a Singapore-based client of one of these banks, who are you going to turn to instead?” asks one senior executive in the region. “It’s not DBS, because you were using these banks before for their international capabilities. Clearly we have an opportunity here.”
The best changes take place not as the result of a crisis, but when you are a position of strength – Robin Phillips
Then of course there is China. Here, HSBC knows it has a big advantage over other international firms. Gulliver likes to say that the Chinese see HSBC as a ‘compatriot’ bank – not a domestic one, but closer to China than any other international bank.
HSBC’s strategy is rather more nuanced than an attempt to just be the biggest non-Chinese bank in the country. Its focus is firmly on the economic-growth heartlands of the Pearl River and Yangtze deltas. This, HSBC’s management believes, will help the bank continue to grow, even if other parts of China suffer an economic slowdown.
“China is a country of 1.3 billion people,” says a senior executive. “Its GDP growth is not the same in every region. Where we are focusing, GDP has been growing at more like 11% per annum. That’s what people don’t understand about China. If you were in North America, would you say: ‘The Midwest is struggling, so we’re going to pull back from the US, even though California is booming?’”
The Pearl River Delta is, through no coincidence, the location of HSBC’s newly announced securities joint venture in China. The bank’s late arrival to the securities JV game had long puzzled its competitors and indeed some senior bankers internally. Management admits that it came close to finding a partner on several occasions, with discussions dating back more than a decade, but had shied away from sealing a deal because local regulators would not allow non-domestic banks to have majority ownership or operational control.
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Gordon French, HSBC |
Then in November last year HSBC announced something of a coup. It would partner with local government fund Shenzhen Qianhai Financial Holdings to set up a securities joint venture based in the financial free-trade zone of Qianhai in Guangdong province. Under an economic partnership agreement between Hong Kong and the mainland, HSBC could own 51% of the JV as a Hong Kong-funded institution. That gives HSBC operational control. It also gives the bank a partner that is a strategic investor rather than an existing brokerage.
The joint venture is still subject to approval from China’s regulators. HSBC hopes to receive it before the end of the year. Insiders admit they may have been lucky to come to the game late. China’s onshore debt and equity markets are starting to boom. This JV gives the bank a unique franchise in domestic Chinese markets; they also believe that access to domestic flows will boost their international offering in renminbi markets.
Another area that HSBC is looking to benefit from through its China business is transaction services. Diane Reyes, global head of liquidity and cash management, says: “The implementation of RMB automated sweeping connecting China with five international financial centres (Hong Kong, Singapore, UK, Germany, and France) was a significant development. Having this strong connection is integral to the bank.”
In an industry where the biggest banks are in search of differentiators, China should be just that for Gulliver and his colleagues. In the medium to long term, China could well be the answer to the criticism that HSBC is not a global bank. “As China’s role in global finance continues to grow, our presence there is extremely important,” says Gulliver. “At the moment, some banks question our relevance in the US. I can imagine a day soon when, in global banking terms, people are questioning the global footprint of US banks because they are not sufficiently present in China.”
‘Universal’
While other banks, under pressure from shareholders, are debating the future of their investment banks, at HSBC the commitment from the top is rock solid. This is, remember, the business that the current group CEO effectively created. Gulliver’s fierce intellect means that, at times, he almost speaks faster than you can listen. But when it comes to discussion about pressure from some shareholders to scale down in investment banking, his voice notably slows, to emphasize the point.
“We’re huge believers in the universal banking model,” says Gulliver. “We have a very strong and deliberate balance between commercial banking, global banking and markets, retail banking and wealth management and the private bank. Our investment banking and markets business is also diversified and less volatile than some of our competitors’. We’re very confident that GB&M can deliver returns in excess of its cost of capital.”
Assaf is completely trusted by Gulliver to get on with the job at hand. That support is critical. It gives Assaf confidence that he will not be distracted from the chosen strategy. Many banks, including HSBC more than a decade ago, took small successes in investment banking and used them as encouragement to run before they could walk.
That will not happen under Assaf. He is a man full of natural Lebanese charm, but do not be fooled into thinking he is a soft touch. In a recent meeting, a colleague was distracted by his smartphone. Without breaking conversation, and when his guest’s eyes were focused elsewhere, he unobtrusively but firmly pointed to his colleague in a gesture designed to make sure he was paying attention. For the next hour, the colleague’s phone was left on the table, untouched.
Assaf says: “We have a superb client base and the appropriate amount of capital dedicated to it. We have done well in equities and M&A in Asia. We’ve built the ground to do more elsewhere, but not outside the franchise.”
Assaf plans to increase HSBC’s focus on transaction services, enhancing the role of relationship managers within that business and putting them closer to global banking. On the other hand, clients such as asset managers and hedge funds, previously part of the financial institutions group in global banking, will now be placed in the markets business, which generates about 70% of the revenues from such clients.
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Spencer Lake, HSBC |
Most importantly of all, Assaf has a business that works. That is not something that HSBC’s senior management has always been able to say over the past decade. What they have said throughout that time, however, is that they are on a path to getting there – to the point at which HSBC has an investment bank that is appropriate for the bank, for its clients and for the current regulatory and market environment.
“We might have been able to increase our revenues more quickly over the past five years if we’d thought that our shareholders would accept a downgrade in return on equity for a few years,” says Assaf. “But that was not in their interests, and we did not do that.”
Competitors often complain that HSBC includes revenues from balance sheet management in its GB&M reported numbers. Assaf takes issue with the charge. “We’ve been transparent about how much we make from BSM every quarter since 2006,” he says. “Let’s be clear: asset and liability management transfer pricing is part of what we do. But we also present client-facing revenues for GB&M. We disclose it all to the market and to our shareholders.”
What is left unsaid is that many competitors are far less transparent about where such revenues, which naturally accrue to big financial institutions, appear on the top line.
Diversification
In a terrible first quarter of 2016 for the investment banking industry, HSBC outperformed in relative terms. GB&M delivered a profit of more than $2 billion on client-facing revenues of $4.35 billion. A closer look at the makeup of those revenues shows how diversified a business HSBC now runs.
Revenues in markets overall, run by Thibaut de Roux, were $1.73 billion. Of that, rates was $546 million, up more than 20% on the first quarter of 2015, foreign exchange was $757 million and equities delivered $303 million – not bad for a firm that competitors say has no business to speak of in equities.
In the final reported quarter for capital financing, it was the single biggest revenue line at $875 million – which is still only 20% of revenues. Payments and cash management came in at $465 million, securities services at £383 million and balance sheet management $703 million.
The performance of the rates division is instructive. It is a business line that many banks are reconsidering. Assaf is not one of them. “Everyone said banks should come out of rates. In the first quarter, the banks that stayed in like us had an excellent quarter. We’ve been able to price at more profitable levels.”
The unspoken message is again clear – HSBC has capital. It will deploy capital where it can make an economic return. If that is in the rates business while others are withdrawing, then HSBC feels it can gain a competitive advantage.
HSBC is far from the finished article. It needs to show, for example, that it can deliver on its promise to do more in the US. Not in domestic markets, but in banking US clients in other parts of the world, or in taking its emerging market clients to the US. It has long been a laggard in technology and must prove that its new-found commitment to digital products and services in its market business is more than mere lofty aspiration.
As a firm, it probably needs to be more aggressive with clients, especially in equity capital markets, where positions as a joint bookrunner need to be converted into much more lucrative global coordinator roles. Westerman knows this. “Yes, we can be more forceful with clients in making sure that we get the right role on their deals,” he says. “But we’re a relationship firm. We’re not just there for the deals.”
Most importantly of all, it needs to stick to its differentiated model and not be swayed by those who will no doubt continue to point out what HSBC is not good at, more than they recognize the areas in which the bank excels.
“You won’t see us chasing global league tables like some other banks, or running a cost/income ratio of close to 90%.” says Assaf. “That is not the direction we have chosen. We prefer to offer good solutions and be credible to our clients and to generate a stable and consistent return.”
