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Agnosticism has come a long way. Once upon a time it was reserved for those uncertain of the existence of a deity: a doubtful open-mindedness. Skip forward a few hundred years and the tech gurus got their hands on it, declaring a product to be platform-agnostic if it worked on both a PC and a Mac.
Now the bankers have grabbed it for themselves, fashioning it into the buzzword du jour to indicate the flexibility of their institution. Product, region, currency: all now lend themselves to agnosticism. ‘Everything everywhere’ is the calling card for the banks that want to trumpet how their firm is a one-stop-shop.
Regulation has increasingly worked against this, of course. And banks have reacted to it by selecting their spots. For every banker who tells you they are delighted to work at a house that is steadfastly committed to being all things to all clients, you’ll find 10 who tell you that they are have done the right thing by sticking to their knitting, and that clients value an expert, not a jack of all trades.
The truth is that the message chosen is the one that serves the bank best. For all the talk, there has often been little fundamental change in mentality. The banks that have ‘done a UBS’ have, like UBS, tended to simply revert to what they were always best at. The ones still doing everything were good, or at least OK, at most stuff before.
That leads to two conflicting messages from the industry. One: that in troubled and volatile environments, clients need the certainty of execution and flexibility that comes from dealing with a firm that can quickly adapt to changing market windows, choosing the product or market that best suits at any one time. Two: that such conditions are precisely when clients value a product specialist.
Many bankers anecdotally talk of market share in their best businesses increasing when markets are tougher to access. In those times clients go back to who they know can deliver best, the argument goes.
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Mark Baker, |
One thing is clear: the conversation around debt has become much more strategic, and not just in event-driven activity like M&A. With CEOs and CFOs now paying attention to their capital structure and their choice of tenor or currency — matters that only a treasurer might have been expected to really get interested in — there is no doubt that those houses with advisory and relationship heritage will have an edge, although only if their product expertise can also make the grade. Nowadays the question the C-suite will ask of its bankers is as likely to be ‘What should I do?’ rather than ‘How do I buy X?’. The franchise that secures that conversation with executives is likely to have at least one foot in the door when talk turns to financing.
That doesn’t mean that picking one’s product spots is a bad idea. Sometimes withdrawal from one area can give the rest a boost. Barclays’ Asia revenues are up since the bank dumped equities in the region: some at the firm think part of that is down to being more focused on what it can credibly tell clients that it can deliver. The fact is, corporates are bored of having 15 banks claim they are good at everything, when it’s more likely that they are simply average at a lot of it.
"The banks that have 'done a UBS' have, like UBS, tended to revert to what they were always best at" |
For event-driven work like that in the jumbo M&A surge of 2015, clients will continue to value the ability to source bridge funding and a subsequent take-out with the involvement of as few counterparties as possible, particularly where confidentiality is at a premium. Likewise, there will continue to be situations where a dual-track approach is wanted: most corporates would rather not have a separate conversation around an IPO and a simultaneous M&A exploration.
But away from those, and for smaller clients, it is intra-product — rather than inter-product — flexibility and breadth that matters. You don’t have to be all things to all men, but in the areas where you choose to play, demonstrating excellence is a must. Increasingly, that means being savvy on all aspects of a product, not on all products. Being the first call on one or two products will make for better returns than being the third call on five.
