May 31, 2018 / 6:13 PM / 5 months ago

HSBC loses senior European deal-makers as M&A ranking drops: sources

LONDON (Reuters) - At least 10 high-profile dealmakers in Europe have left HSBC (HSBA.L) in recent months at a time of record merger activity, after the bank failed to overhaul its investment banking unit and revamp client teams, four sources said.

A HSBC and a Barclays bank building is seen at Canary Wharf in London, Britain May 17, 2017. REUTERS/Stefan Wermuth

Overall dozens of investment bankers have quit, including senior managers at the bank’s top performing European private equity team, the sources familiar with the matter told Reuters.

The departures reflect a growing sense of frustration over what the sources said was a lack of clear investment banking strategy at Europe’s biggest bank and its failure to rebuild a competitive team on the continent.

They also highlight the difficulties European banks face in catching up with Wall Street rivals, whose dominance in investment banking league tables has increased.

A spokesman for HSBC said the bank hired dozens of senior bankers recently, significantly outweighing the number of departures. The majority of the hires are based in North America and Asia, according to a list provided by the bank.

“We continue to see good momentum across our financing and advisory franchise, taking leading roles in recent high-profile transactions,” the spokesman said.

Chief Executive John Flint said in April that he wanted to double down on HSBC’s “pivot” to Asia and China in particular. On Feb. 27, the bank announced two hires in North America to strengthen its investment banking there.

Flint will unveil his strategy on June 11 and is expected to announce further investment in China.

While there is no hiring spree, the bank is seeking to scale up its presence outside Europe.

Some staff told Reuters they left because they felt the European business was rudderless.

One of HSBC’s most senior dealmakers in Germany, Norbert Reis, will leave in June, according to the sources. He previously served as head of global banking in Germany.

HSBC’s consumer and retail director Patrick Philion and European private equity co-head Umberto Giacometti both quit in May to join Nomura, the sources added.

The departures follow the abrupt exit in November of HSBC’s top investment banker, Matthew Westerman, a Goldman Sachs veteran hired with a mandate to shake up the investment banking unit in Europe and revive growth.

“BARE BONES”

Like most global banks, HSBC had been shrinking its investment banking business following the financial crisis. In 2015 it slashed nearly 50,000 jobs and cut its investment bank by a third to restore growth across its sprawling empire.

Westerman’s appointment in 2016 was aimed at regaining market share and competing with U.S. rivals. Instead, he left after 18 months, having cut 100 jobs, and has not been replaced.

“Westerman did the clean-up job but had no time to rebuild and reorganize the unit,” said one banker who left recently. “Most teams have been reduced to the bare bones.”

Other bankers also said HSBC had lost direction since Westerman’s departure and questioned the depth of its commitment to growing its investment banking franchise.

The turnover appears to have taken its toll, with HSBC dropping to 42nd this year in the global M&A advisory ranking from 15th a year ago, according to Thomson Reuters data.

M&A advisory has never been a strong area for HSBC, which is mostly known for its debt capital markets and lending activity. But over the past five years its M&A ranking ranged between 17th and 24th.

DEFECTIONS

The bank’s private equity and leveraged finance teams have been hit hard by recent defections.

HSBC global private equity head Alexis Maskell left in March to join Citi while Bala Ramesh, a director in leveraged credit syndicate, quit in October to join Jefferies.

Maskell’s right-hand man Giacometti left in mid-May after 11 years at the bank while Tim Kerry, a managing director specializing in leveraged finance, resigned to join Barclays.

Omar Faruqui, previously co-head of European private equity, also joined Barclays in January.

Dan Cohen, the head of HSBC’s high-yield trading, left the bank in April to join Nomura while Stephen Smith joined Barclays last year as a director in the high-yield syndicate team.

Senior managing director Luca Pietrantoni was among the most recent departures.

A number of more junior bankers also moved on in recent weeks, including two associates in the financial sponsors team — Gerald Aichberger and Carol Rusin — and analyst Emiel Khakhar.

Some industry sectors as well as regional teams in Europe have been left unstaffed, the sources said.

HSBC recently advised JAB Holdings on its 1.5 billion pound purchase of UK food chain Pret A Manger and worked with Dulux paint maker Akzo Nobel on its 10.1 billion euro sale of its specialty chemicals unit in March.

But the bank missed out on major roles in some of the biggest deals this year, including Japanese firm Takeda’s 45.3 billion pound purchase of London-listed drugmaker Shire.

In a bid to win more M&A work, HSBC is in the process of hiring former Morgan Stanley banker Kamal Jabre, who used to run the Middle East and North African region, as its global head of advisory, a source close to the bank said.

HSBC declined to comment on the appointment. It recently named one of its senior bankers, Borja Azpilicueta, as global head of financial sponsors, sovereign wealth funds and institutional private clients.

Additional reporting by Lawrence White; Editing by Mike Collett-White

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