However, speak to any top Euromarket syndicate manager and they will say that all of the above have the potential, but that the leading contender is SBC Warburg. “SBC Warburg today is like CSFB in the 1980s,” says a senior new issue trader.
Who has been responsible for the transformation of SBC Warburg from the laggard of the Big Three Swiss banks into the Swiss primary market leader? Within the bank there is total agreement that SBC itself was turned inside out (for the better) by O’Connor Associates, acquired in 1991, but that the renaissance of the fixed-income business was largely orchestrated by the “Two Steves” Stephen West and Steven Oristaglio.
The once mercurial West may have calmed down a little from his wildest days but he defies the view that the current generation of top Euromarketeers are dull, mono-syllabic bean-counters. Stories of West’s exploits and love of fun abound. Tales of a smashed Reuters monitor he didn’t actually throw it at a colleague are part of Euromarket folklore, but sadly it’s not true that he deliberately crashed his very expensive company car into the underground car park wall one year when he was dissatisfied with his bonus Paribas did not supply such luxuries.
While West, 37, believes in enjoying life to the full, there’s a professional dedication which has contributed to a sparkling Euromarket career. After a training period at Orion Bank, he joined Paribas in 1987 where he stayed for six years and made his name in structured swaps and debt syndication. He enjoyed those days when the French bank, then led by Patrick Stevenson, was on the crest of a wave. “It was the best derivatives house in London by a clear margin,” comments West.
He was hired by SBC in January 1994 to be head of debt syndicate. The prospects for the bank in the Euromarkets at that time looked bleak. In the previous year SBC wasn’t in the top ten Euromarket issuing houses. Worse still, the bank had failed to win any prize mandates during the best year in history for the fixed-income markets.
But West had his own mandate within the bank. The view which he shared with his senior colleagues was that the fixed-income business was globalizing and had become structurally profitable for the largest players. West worked with Manfred Scheppers, now global head of debt capital markets; Richard Johnson, now global head of syndicate; and Steve Oristaglio who ran all of the bank’s secondary market trading. Their plan was that SBC should become one of the top five bond issuing houses and the leading Swiss issuing house in the Euromarkets.
Low key
West says that the O’Connor contribution was a key factor in SBC’s subsequent success. “They provided the fixed-income framework, rationalized the swaps business and reorganized the balance sheet and the derivatives operations.” When that restructuring had been completed, the O’Connor managers turned their attention to bonds and in this area West praises the role of Steve Oristaglio, formerly with Salomon Brothers. “He has been the principal driver behind the bank’s renaissance in fixed-income,” says West. He also believes that Manfred Scheppers is “the best originator” in the business.
At a time when houses such as BZW, Deutsche Morgan Grenfell and UBS have been making headlines with multi-million dollar hirings, SBC Warburg remains remarkably low-key. Most of the top O’Connor executives, including the reclusive chief operating officer, David Solo, and Andy Siciliano are home-grown and have been with the company for the whole of their working careers. That mentality is now becoming evident in SBC Warburg’s recruiting policy. West and Oristaglio have a firm commitment to hiring top quality university graduates and trainees and providing some of the best educational programmes in the industry. While he doesn’t scorn “superstar” hires, West believes that 50% fail to work out. “Houses are always looking for the quick fix, the panacea and it’s totally ephemeral,” he says.
West is also sceptical about the new generation of chief executives at some rival Euromarket houses: “Many of them are essentially head-hunters rather than business managers or business growers. Their attitude is that most deficiencies can be overcome by having a big cheque book If they pay someone $3 million to $5 million a year they hope to get back $50 million or more. However, there’s no guarantee that this approach will work and remember also that every $5 million superstar you bring in will cause resentment among your existing staff. Far better to correct the supply/demand imbalance by hiring and training graduates.”
While SBC Warburg’s fixed-income success is unquestioned, there are still a few chinks in the bank’s armour. West admits that the bank needs to be as good in Deutschmarks as it is in dollars. But the main weaknesses have been outside Europe, especially in Asia.
West concedes: “We need to be a top house there because the market is wide open and has huge potential.” Also, the bank’s success in US dollar bonds has not had the advantage of a strong US domestic franchise which the bank’s bulge bracket competitors in New York enjoy. West acknowledges that a larger presence in the US. is necessary. He says: “It is incredibly difficult to compete head-on with the US bulge houses without that shot of adrenaline coming in at noon when the US opens. We have to work twice as hard because we have to drive the US whereas, for them it is the other way round.”
At 37, is West tiring of the business? Not at all. He says he thrives in the business environment and in rising to the business challenge. In his own particular area of responsibility within the bank, the real work has only just begun. He foresees credit risks trading across all products and believes that credit itself has become the new asset class.
With his wife and two young children he enjoys holidays which are based around outdoor activities and which are “physically involving”. His sense of humour leans towards slapstick “nothing too sophisticated”, he says. Colleagues therefore no longer need to fear a flying Reuters monitor but they should be on the lookout for the occasional flying custard pie or a well-aimed cream trifle.
