Following the merger of capital financing and banking, which resulted in a single global banking division, HSBC has unveiled a new structure for its investment banking business aimed at delivering "seamless coverage to our clients, optimise our product capability and allow us to become more agile and holistic", according to a memo signed by the bank's co-heads of global banking, Robin Phillips and Matthew Westerman.
According to the memo, the new structure will create better alignment within global banking with country, product and sector teams to be "aligned to the client base that they serve"; as well as position the bank to forge "deeper and closer relationships" with its partners in global banking and markets (GB&M), commercial banking (CMB) and the wider group; and deliver a "more cost efficient structure" and "generate synergies" within global banking.
The reorganisation of the investment bank comes on the back of HSBC's Q1 2016 results which showed "a resilient performance despite challenging market conditions" with a profit before tax of US$6.1bn in 1Q16, down by US$953m or 14%. In the global structured products market, HSBC remains dominant with a 9% market share year to date across US$13.8bn in sales including tranche-based, non-retail, leverage and flow products, followed by Agricultural Bank of China, DBS and Vontobel. Taking into account tranche products only, the UK bank has a 3% market share on the back of US$2.6bn in sales year to date, and remains in the top 10 ranking although in eighth position, after finishing fifth in 2015. SRP data shows that HSBC has over 140,000 live products and over 790 structures open for subscription across jurisdictions.
The bank's equity derivatives team which falls under the global banking and markets unit remains untouched with the top executives in the bank's structured products business such as Nicola Pantone, the bank's head of institutional equity derivatives sales, Asia Pacific, in Hong Kong; Todd Fruhbeis, head of equity derivatives sales and wealth management sales for the America; and Alain Alev, head of structured equity derivatives sales, Europe, Middle East and Africa (Emea) at HSBC, retaining their roles.
Under the new structure, the newly created corporate, financials and multinationals banking group (CFMB) will bring together credit and lending (including portfolio management), a newly-created transaction banking management group within global banking, multinationals and working capital management. CFMB will focus on working closely with the regional heads of global banking in overseeing and managing all aspects of risk, including balance sheet, financial crime and operational risk; managing capital allocation and portfolio and RWA management; and driving the bank's flow businesses, in particular with global liquidity and cash management (GLCM), global trade and receivables finance (GTRF) and HSBC securities services (HSS).
According to the memo, the new structure will enable the investment bank to lead "the digital transformation of our on-boarding processes and our products in partnership with internal stakeholders and third parties", while the creation of new verticals such as the new advisory team will bring together all the bank's M&A and corporate Finance expertise, "creating a single group that provides seamless strategic advice to clients across sectors and regions".
Under the new structure, there will be no change to the regional global banking structure which includes regional teams for Asia Pacific, Continental Europe, North America, Latin America, the Middle East & Africa and the UK, but the capital markets unit will not go unscathed, and has been positioned to work more closely with other parts of global banking and global markets, including with the infrastructure and real estate team on green bonds, the China country and product teams on RMB internationalisation. Equity capital markets (ECM) will focus on improving its "share of economics on deals and increasing the number of joint global coordinator and joint book-runner roles".
According to the memo, the wider HSBC group will also seek closer engagement with global markets with the aim of "improving our speed to market and increasing our share of block trades". Structured equity finance (SEF) remains in ECM and will work more closely with the wider derivatives business in global markets.
"The environment around us is changing, and we must adapt to ensure that we use our competitive strengths - our strong balance sheet, leading franchise in key markets and our international network - to continue to help our clients succeed," stated Phillips and Westerman, in the memo. "Our new structure will deliver the best outcome for our clients by bringing our country, sector and product teams closer together - and improve returns for our shareholders by improving our profitability and generating efficiencies."
Click the link to view the new structure in Global Banking and the appointments announced in the memo.