Palmer was a relic from the Studzinski era at HSBC. Studs joined the bank in 2003 from Morgan Stanley and proceeded to hire a hoard of investment bankers on plump guarantees. Danny was hired from Morgan Stanley Asia in late 2004 to run global equity capital markets. He does not seem to have done a fabulous job. HSBC fell to 19th globally last year in underwriting equity and equity-linked sales from 14th in 2005. The rumour is that he was given a contract by Mr Studzinski worth £8 million over 2 years. A mole commented: “Danny is intelligent and industrious. But he was completely unprepared for life in the second-tier.” A call to Mr Palmer was not returned.
Mr Palmer’s resignation has been greeted by a chorus of wailing in the press. The Financial Times’ respected Lombard column last Thursday quite simply got it wrong. Lombard talked about the surprise resignation of Daniel Palmer. Was Danny’s resignation a surprise? I don’t think so. Banks are always at risk of losing staff when big guarantees come to an end. Equally significant, Palmer’s reporting lines had recently changed. As global head of capital markets, Palmer used to report to Mike Powell, HSBC’s chief of global markets. A month ago this was changed and he was given a dual reporting line to Powell and to Robin Phillips and Paul Hand, co-heads of global banking. As an ex-investment banker myself, I know there’s more angst attached to reporting lines than probably anything else.
The Lombard column thundered: “[Daniel Palmer] was the link between HSBC’s existing corporate clients and the world’s institutional investors who might buy their debt or equity.” I am afraid this is nonsense. Palmer’s last role was more administrative than hands-on, client focused. HSBC has 212 DCM and 76 ECM specialists still at their desks. Palmer, who one insider described as: “Quite a good egg,” will not be replaced. Surely that says it all? If someone has a vital function at an organisation, a successor needs to be appointed.
Most commentators have missed the fact that HSBC’s corporate and investment bank has changed direction. It no longer has aspirations to be a top league advisory firm. That dream (or should I say illusion) was part of the star-studded, Studs era. I was dubious when the firm set out on its path as a Goldman Sachs wannabe. A chief executive told me recently: “Firms have different DNAs.” It is important to pick your spots correctly. If you think about the rise of Barclays Capital from the ashes of BZW, Bob Diamond played to the bank’s strengths. He created a global markets powerhouse but was cautious about venturing in to cash equity markets or M&A. Stuart Gulliver, who is now chief executive of HSBC’s investment bank, talks about an emerging-market led, finance-focused strategy. That seems logical to me. Execution will be key, of course.
Last year, HSBC’s corporate, investment banking and markets division made a pre-tax profit of $5.8 billion (€4.3 billion). Deutsche’s corporate and investment bank achieved underlying pre-tax profits of €5.9 billion during the same period. This may not be a fair comparison as Deutsche is strong in both equity origination and advisory. Nevertheless, Mr Gulliver has a mountain rather than a hillock to climb. Yet, I feel he has been hindered by the legacy of former co-head John Studzinski: an unrealistic strategy (for which Gulliver as co head also bears responsibility), inflated guarantees and an influx of investment bankers fermented discontent and created a firm within a firm. There is upside in every story. Bankers like Mr Palmer have done well financially out of HSBC’s adventure in to investment banking. And the trustees of London’s Tate Modern are sporting Cheshire cat smiles. Mr Studzinski recently donated £5 million to the gallery – its largest private gift. I think we should wait until we see the first half profits at HSBC’s investment bank (due in early August) before writing off the division. What do you think?
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The man next to me proffered his hand and said in Humphrey Bogart like-fashion: "Hello Abigail. I’m Simon Meadows of Credit Suisse. Well done. People are always hopelessly indiscreet on planes" |
A prince
It might have been a scene from a film. I had been invited to the 39th International Capital Market Association conference by ICMA’s executive president, the delightful Rene Karsenti. The plane to Berlin was about to take off. I was talking to my online editor about some amendments to my column. Cautious (or should it be paranoid?), I avoided naming the bank and only used initials for the protagonists. As I hung up, the man next to me proffered his hand and said in Humphrey Bogart like-fashion: “Hello Abigail. I’m Simon Meadows of Credit Suisse. Well done. People are always hopelessly indiscrete on planes.” Simon who is co-head of European fixed income distribution is a legend. His name is often mentioned in a sing-song like refrain: “Walsh, Meadows, Egan and Fleming.” These gentlemen managed the fixed-income syndicate and origination desks when CSFB was a primary market prince in the early 1990s.
I am beginning to have a soft spot for Credit Suisse. I was a sceptic until recently. The firm tended to exhibit a me, me, me culture that landed it in trouble with the regulators and even confounded John Mack, CEO of CSFB and then co-CEO of the Credit Suisse Group. I am a fan of Michael Philipp, Credit Suisse’s chief executive for the EMEA region. Mike is open and articulate with a wicked sense of humour. And he understands that the press can be a friend rather than a foe to the competent CEO.
Invisible man
Alas, I wish I could say the same of UBS’ senior management. A request to meet Huw Jenkins, chief executive of UBS’ investment bank was met with the response that hectic Huw was “very tight” and unavailable for a meeting. Isn’t that a bit odd: a chief executive who is too busy to explain the firm’s strategy to the press? I was offered an appointment with Jenkins’ chief of staff, Suneel Kamlani, but that was subsequently cancelled. Might it be possible that an hour with the Abigail with Attitude column is not everyone’s idea of heaven? I might take this personally except for the fact that a source grumbles: “What’s happened to [Marcel] Ospel? The man’s virtually invisible. Isn’t he meant to be running the show round there?” Mr Ospel is chairman of UBS. The demise of Dillon Read Capital Management was greeted gleefully by the press precisely because the operation had been surrounded in opacity. It made darkness look light. UBS needs to re-think its press strategy.
UBS did, however, do well in Euromoney’s primary debt poll, which asks borrowers to name the best banks for various categories. Results were announced this Tuesday and UBS was ranked number one overall, up from fourth in 2006. UBS beat Deutsche, which fell from first to second place. In third, and up from sixth, is JPMorgan. I offer my congratulations to my old friend Mike Ridley, co-head of global syndicate and capital markets. It is interesting to see that Citigroup has slithered down four places to number six over the last year. However, HSBC sneaks in to the top 10 at number 10. Credit Suisse is up from a lousy 17 to a slightly less lousy 14. There is still room for improvement. At least, that gives incoming head of securities, Michael Ryan, ex-Goldman Sachs, something to think about.
Rumour of the week: As the battle for ABN lumbers on, a mole mutters that there might be a third contender lurking in the wings. BNP Paribas is apparently holding itself aloof from providing finance or advice to either Barclays or the RBS consortium. Could BNP and BOA team up to pounce on the doughty Dutch? Mole whispers that if BNP needed to raise cash, it could sell its US retail operation, BancWest, to BOA. BancWest’s performance in the first quarter of 2007 was disappointing: pre-tax profit down 20% from Q1 2006. Wouldn’t BNP be better off focusing on Europe and emerging markets? There are bits of ABN that would fit well with such a strategy. Baudouin Prot, BNP’s chief executive, is on record as saying that he is not interested in ABN. However, as far as I’m concerned, it’s not over ‘til the fat lady sings.
Laugh of the week: When I was in Berlin, I had dinner with an American friend. He described a billboard campaign in Chicago that caused uproar in the city. The campaign was undertaken on behalf of an all-female legal firm. The slogan trumpeted: “Life’s short, get a divorce.” The firm had to recruit an extra receptionist to deal with the torrent of incoming phone-calls, mostly from men.
Next week: The column has a Gallic (or should that be garlic?) flavour. Please send news and views to abigail@euromoney.com