There are exceptions, of course. Hans-Joerg Rudloff, chairman of Barclays Capital is one. I speak to many people in the market. And when they discover that I used to be at Barclays, they often enquire in reverential tones: “Did you ever work with Rudloff?” An investment-banking chief asked me this question yesterday. And when I replied in the affirmative, Chief launched in to a eulogy about the greatness of Rudloff as a banker, his acumen on markets and his ability with clients. But if you delve deeper, there are lots of Rudloff-doing-good stories that never appear in the public domain. As I said, classy.
In an earlier column, I berated Bank of America for its “lackadaisical attitude towards investment banking”. The next day, I received a brief email from Jonathan Moulds, Bank of America’s president for EMEA and Asia. “Dear Abigail,” Moulds wrote. “Firstly, congratulations on your new role with Euromoney. That is a great position to have! Would be good to catch up at some point. Clearly I have some education to do.”
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Jonathan Moulds wrote to me: “Clearly I have some education to do” |
This classy response to negative press coverage impressed me. Normally, when I write something that a protagonist disagrees with, they splutter down the phone to my boss’s boss. I always imagine that the editor-in-chief murmurs something soothing and, as he puts down the phone, he puts up his feet, pulls on a cigar and purrs: “Well at least they’re reading the God-damn magazine!”
I promised Jonathan that I would look again at Bank of America. In mid-October, the bank reported good results. Third-quarter net income increased by 41% (year on year), driven by the acquisition of credit card group MBNA and a gain from the sale of Brazilian operations. The shares are up some 20% over the last year.
The key question is: where will the bank’s growth come from? It dominates the home market and, since its market share of deposits is over 10%, it is barred from acquiring another American bank. An insider talks about future growth coming from Europe and Asia. However, chairman and CEO, Kenneth Lewis is on record as saying that there is no strategic imperative to make an acquisition.
According to Richard Bove, an analyst at Punk, Ziegel & Company: “Bank of America has a dominant position in a series of businesses that generate huge recurring streams of cash... It is a magnificent company with a sterling track record. It should be owned.” You might be forgiven for thinking that Bove is Lewis’s mother in disguise. Nevertheless, in retrospect, the purchase last June of a 9% stake for $3 billion in China Construction Bank was canny. China is now more fashionable than a Pucci poncho. Following the flotation last week of Industrial & Commercial Bank of China, commentators estimate that BoA has a $5.5 billion gain on its own Chinese caper. My congratulations to Ken. Perhaps there’s more synergy between Beijing and Charlotte, North Carolina than one would imagine. What might have been an opportunistic pounce now looks mightily strategic. BoA can increase the stake to 20% during the next four years. And this option gives such a domestically focused institution a toehold in probably the most significant growth market in the world.
As of September 30, 2006, 32% of BoA’s revenues came from the global corporate and investment banking division. One of my colleagues snorted: “Bank of America may be top dog in the US but it is still insignificant in investment banking. And I don’t see that changing any time soon.” Yet the bank is making progress. At home, to September 30 this year, it is ranked second in syndicated loans, fourth in investment grade debt underwriting and 10th in equity underwriting. BoA’s international investment banking franchise is weaker, although it is a major player in syndicated loans.
A top European capital markets specialist, Cassie, muses: “I never come up against BoA. But that doesn’t mean I couldn’t. There’s not a huge gulf between the leaders and the also-rans in this business. It’s like Formula 1. Every car goes 200 miles an hour – an extra two-10ths of a second can make you a winner.”
Another source has a different view: “Bank of America leads with its cheque book. I don’t think you ever want to be in a position where you have to buy your way in to a client.” But I agree with Cassie. In the last decade, I’ve seen commercial banks like Deutsche and Barclays move from puny to powerful in the investment banking arena. However, there has to be sponsorship from the top. And if Ken isn’t keen, BoA’s investment banking charge is doomed. Cassie again: “They will need both economic and human capital. If an organisation is dysfunctional, no individual can succeed. You need the right people in the right structure.”
Jonathan Moulds tells me: “We need to broaden the client footprint in Europe and Asia... do more with corporates, financial institutions and sponsors. And distribution capabilities need to be built further.” Moulds insists that there will be continued investment in 2007: “I now have an excellent leadership team and they will be able to attract other talented individuals.” So, essentially, the message is: ‘Watch this space’. I will be interested to see what happens in the first quarter next year – always a febrile period for recruitment.
And talking of talented individuals, I received an intriguing email enquiring about Anshu Jain, co-head of Deutsche’s investment bank. A Mr Gutzmer from Munich claimed to be writing a profile of the great man for “the German Vanity Fair” and had a number of questions. While the intent was no doubt worthy, the language was, to quote Miranda Priestly, “a disappointment”. Over to Mr Gutzmer: “Is there a kind of ‘Indian management style’ he [Jain] brings about? Or is he simply ‘one other tough banker’?” My favourite question was: “Have you or any of your colleagues ever personally experienced him? What was it like?”
While it is amusing to have our top bankers treated as cheeses – produce to be tasted and savoured – I would encourage Mr Gutzmer to “experience” Mr Jain for himself rather than rely on hearsay. Gutzmer’s final line of enquiry had a certain resonance given the appearance in court last week of Josef Ackermann, chief executive of Deutsche Bank, at the Mannesmann retrial. “Is he [Jain] still considered by the financial community as the next CEO of Deutsche Bank? Or what other career options might interest him?” Yes, indeed! I wonder what other career options might interest Mr Jain? What do you think?
Next week: I am in the Big Apple and feel like a plum pudding.
Please send news and views to abigail@euromoney.com