Latest news with #EdSankey
Zawya
8 hours ago
- Business
- Zawya
Can HSBC shrink its investment bank to greatness?
HSBC's exit from ECM and M&A in Western markets wasn't a surprise. The bank said its activities in those markets cost it around US$300m a year and were not materially profitable. So a straightforward decision, right? Not necessarily. Investment banks, more than any part of a bank, are people businesses in which the assets have legs and can walk out the door. Employees also often have inflated egos and are usually convinced that business comes to the bank because of them – not the other way around. In recent weeks, three senior global heads have departed to competitors – Kamal Jabre (head of M&A), Ed Sankey (head of ECM) and Dan Bailey (head of TMT investment banking). More are likely to go, and players like HSBC in the middle of a restructuring often find themselves having to pay a premium to keep their best talent. When HSBC announced the shrinking of its ECM and M&A businesses it didn't mention research and many at the bank suggested it remained committed to global coverage. That seemed very strange as research is typically a heavily loss-making business subsidised by investment banking. Moreover, in Europe and the US, HSBC has a weak franchise in research. Unsurprisingly, then, HSBC has since confirmed it is concentrating its research in line with the geographical refocus of its ECM and M&A footprint. As well as focusing its equity research efforts on Asia-Pacific and Middle East stocks, there are suggestions that remaining London-based analysts will cover global multinationals heavily exposed to these regions. Shrink to fit? Shrinking an investment bank is difficult. In most cases the really hard bit is exiting balance sheet-heavy businesses with the challenge of unwinding legacy positions such as long-dated derivatives. We saw with Credit Suisse how, when done badly, it can exacerbate a death spiral. But Credit Suisse also gives us a case study in dis-synergies from exiting business lines. When the bank lost US$5bn in the Archegos Capital Management debacle, the bank's reaction was to exit the prime brokerage space. This put even more pressure on the economics of Credit Suisse's equities business, accelerating its market share losses in equity trading with the key hedge fund client base. When shareholder Ping An Asset Management had suggested several years earlier that HSBC split itself up, the bank highlighted that the core of the Asian business was a global network. Former CEO Noel Quinn said when announcing second-half 2022 results that the bank had 'a 20% wallet share of wholesale banking client business from Europe, the Middle East and the Americas into Asia' and that '45% of our wholesale client business is booked cross-border and a large proportion of the revenues booked domestically for wholesale clients comes to us because of the business we do for those clients overseas, and we will continue to grow that number'. In other words, we're in Europe and the US in large part because of the money we can make serving clients in those regions doing business in Asia and the Middle East. Will it work? So will that work with the new strategic refocus? The centre of HSBC's wholesale business is cross-border payments, lending and FX, not ECM and M&A, but the departure of senior global rainmakers makes you wonder about potential dis-synergies, such as losing the ability to compete in large cross-border transactions such as a Middle East or Asia business looking for Western private equity or corporate buyers or helping a Middle East or Asia business looking to IPO in London or New York. Will the new model have the C-suite and boardroom connectivity for the former or the distribution to European and US institutional investors for the latter? If HSBC is no longer seen as being able to compete in cross-border ECM and M&A, will it be stuck competing to be the local investment bank in deal mandates against Indian, Chinese and Middle Eastern banks? This is a pretty crowded space. HSBC is not a top 10 player in ECM or M&A in Asia-Pacific or in major markets like China and India, although it is certainly a market leader in the Middle East. Skewered? HSBC has committed to a global footprint in DCM that ties into its global corporate transaction banking and lending footprint. DCM also tends to focus on CFOs and corporate treasurers while ECM and M&A relationships are more focused on boardrooms and CEOs. But the geographical skew of HSBC's DCM franchise is at odds with the bank's overall geographic strengths. According to LSEG fee statistics, HSBC's global DCM ranking has been steady between nine and 11 over the last six years, depending on the mix of issuers. And yet the majority of its DCM revenues come from Europe and the US with a top five or six position in Europe and even higher in the UK. Non-US banks typically have strong DCM franchises in their home markets where they offer a full service investment bank. The bulk of HSBC's wholesale banking franchise is insulated from shrinking its investment bank. But a major talent drain leading to a negative feedback loop in its remaining ECM and M&A footprint or its global DCM business could still be costly. Moreover, a firm that loses advisory business, primary and secondary share sales and bond mandates will see a knock-on effect to trading franchises in cash equities, equity derivatives, credit and interest rate swaps. In trying to shrink to greatness, HSBC must be careful not to shrink into irrelevance. Rupak Ghose is a former financials research analyst
Zawya
22-05-2025
- Business
- Zawya
Sankey switches to Citi from HSBC: IFR
Ed Sankey is joining Citigroup as head of ECM for EMEA, departing from HSBC where he was global head of ECM. His departure from HSBC is little surprise as Sankey had recently seen his remit cut in half with the closure of ECM operations in the US and Europe as the bank focuses on Asia-Pacific and the Middle East. He is based in London. Sankey joined HSBC in mid-2019 as global head of ECM following 15 years at Deutsche Bank. His move to HSBC came just before Deutsche slashed thousands of jobs as it pulled out of equity trading and adopted a new model for ECM. His appointment was the latest to attempt to lift HSBC's ECM operation to capitalise on the scale of its corporate bank. HSBC has experienced great success with the growth of ECM in the Middle East, where it can claim to be both a local and global bank and consistently wins top line roles, resulting in it being named IFR's EMEA Equity House of the Year for 2022. Valery Barrier was running Citi's ECM in the region and will step down from management and focus on covering clients. That marks a complete transition from the ECM leadership team in EMEA prior to the arrival of Viswas Raghavan and Achintya Mangla from JP Morgan last year. James Fleming moved from his role as the London-based co-head of global ECM and Suneel Hargunani left the bank having been co-head of EMEA ECM, alongside Barrier. Ken Robins, chairman of EMEA ECM, is retiring at the end of the year. Sankey worked with Raghavan at JP Morgan earlier in his career and then with Barrier at Deutsche Bank. Sankey will report to global head of ECM Doug Adams when he joins in three months. Martin Zoll has been appointed head of ECM and co-head of strategic equity and financing at HSBC. Zoll joined the bank in 2017 in Hong Kong.
