IFR International - 03.11.2018

BARCLAYS DIRECTOR CRAWFORD GILLIES ON NIGEL HIGGINS, P

ROTHSCHILD has

hired Federico Mennella

as a managing director

in its global advisory

business. He will work

from New York and

lead the bank’s North

America chemicals

group. Mennella joined

from middle-market

investment banking

boutique Lincoln

International, where he

ran its global

chemicals and

materials practice. He

also spent nine years

at Lazard in New York

and Frankfurt. He has

previously served as

head of US M&A at

Deutsche Bank and

head of chemical M&A

at JP Morgan.

MUFG has appointed

Zahra Sadry as head of

healthcare for EMEA

within its investment

bank in London. Sadry

will move on December

1 from MUFG’s strategic

finance team, where

she is currently a

managing director

responsible for

Germany, Austria and

Switzerland. Sadry

joined MUFG in 2015

after five years at HSBC

in its leveraged and

acquisition finance

team. She previously

spent six years at

Deutsche Bank. MUFG

said Sadry will be

tasked with developing

new relationships in

healthcare services,

medical technology

and pharmaceuticals.

Who’s moving where...

Transaction banking gives HSBC a lift

HSBC’s pledge to rein in costs while growing
revenues is showing signs of bearing fruit
AFTERûAûûJUMPûINûPROlTûLASTûQUARTERûASû
buoyant transaction banking products gave
its investment bank a lift.
0ROlTSûINû(3"#SûGLOBALûBANKINGûANDû
markets division in the July-September quarter
rose 21% from a year ago to US$1.81bn. All its
transaction banking products played a part:
revenues from liquidity and cash management
were up 23%, there was a 14% rise in securities
services, and a 12% increase in trade and
RECEIVABLESûlNANCE
Its global banking division was more
sluggish, with adjusted revenues down 2% to
US$908m, attributed to lower primary
corporate issuance, especially in equity
capital markets. The performance was
BROADLYûINûLINEûWITHûAûmATûPERFORMANCEûBYû
the big US banks in the third quarter.
The global markets business had a mixed
quarter, with revenues up 5% overall at

53BNû2EVENUESûFROMûlXEDûINCOMEû

currency and commodities rose 10% to

US$1.46bn, with FX and credit up 39% and

ûRESPECTIVELYûASûITûBENElTEDûFROMûHIGHERû

volatility, particularly in emerging markets.

But rates revenues slumped 29%.

Revenues from equities fell 13% to

US$284m, weaker than most rivals. US

banks’ equities revenues rose 8% from a year

AGOûONûAVERAGEû(3"#ûSUFFEREDûFROMûWEAKERû

equities markets in emerging markets and

in Europe, and its underweight position in

US markets, where revenues were strong.

(3"#SûINVESTMENTûBANKûHASûCOMEûUNDERû

renewed scrutiny after a scathing

anonymous memo sent to executives in

August. The unsigned memo, claiming to be

from a group of concerned senior bankers,

was highly critical of strategy, performance

and culture, especially in global banking.

(3"#ûINSIDERSûSAYûITSûINVESTMENTûBANKûHASû

a different model and is more focused on

DEBTûlNANCINGûANDûTRANSACTIONûBANKINGûTHANû

rivals, who typically are stronger in M&A

and other advisory business.

4HEûLATESTûRESULTSûREmECTEDûTHATû

ûANDû

delivered decent returns.

“The numbers we’ve produced today show

our business model is a little different, it’s one

THATûlTSû(3"#ûANDûOURûFOOTPRINTvûCHIEFûEXECUTIVEû

John Flint told reporters on a conference call.

“The notion that our banking business

might not be as strong as one of the bulge

brackets is maybe a valid observation - but

no more valid than the fact our transaction

banking business is a lot stronger.

“We have a different business model.

We’re in good shape with GB&M and the

numbers support that,” he said.

GBM’s return on tangible equity was

ûFORûTHEûlRSTûNINEûMONTHSûOFûTHISûYEARû

better than most European investment

banks and above group RoTE of 10.1%.

(3"#ûREPORTEDûGROUPûTHIRDûQUARTERû

revenues of US$13.8bn, up 6% from a year

ago. Operating expenses fell 7% to

EU stress test shines light on Barclays, Deutsche

BARCLAYS, DEUTSCHE BANK and LLOYDS fared badly
in terms of capital strength or leverage ratio
under a stress test of the biggest European
Union banks released on Friday.
The European Banking Authority tested 48
of the biggest EU banks to see if they were
strong enough to withstand a severe three-
year economic recession. The results were
released after markets closed for the week.
The EBA did not set a pass or fail mark.
But the health check aimed to shine a light
on banks’ capital strength and exposures,
ANDûmAGûUPûANYûLAGGARDSûTHATûMIGHTûNEEDûTOû
raise capital or ditch assets.
Investors were watching how much
common equity Tier 1 capital lenders held

above a 5.5% threshold, under the test’s

most adverse scenario. No banks fell below

5.5%, so they may not need to take any

action to improve capital.

Under the adverse scenario, Barclays’ CET

ratio fell to 6.37% in 2020, according to results

published by the EBA. That was the lowest of all

the banks tested.

Under the stressed scenario, the CET

ratio in 2020 for Lloyds fell to 6.8% and for

Italian bank BANCO BPM to 6.67%. Other

weaker performers included Germany’s

NORDLB, whose ratio fell to 7.07%, and

France’s SOCIETE GENERALE, with a 7.61% ratio.

$EUTSCHEû"ANKSû#%4ûRATIOûFELLûTOûû

in 2020 under the adverse scenario.

"UTû$EUTSCHESûLEVERAGEûRATIOûWASûONEûOFû

the weakest of all the banks, and under the

adverse scenario would have slipped below

the 3% minimum that banks are required to

hold under Basel III.

4HEû%"!ûRESULTSûSHOWEDû$EUTSCHESû

leverage ratio was 2.61% in 2020 under the

adverse scenario.

NordLB showed an even lower leverage

ratio of 1.83% in 2020 under the adverse

scenario. Other banks to show a low

leverage ratio in 2020 under the adverse

outcome included Barclays (2.96%) and

Banco BPM (2.71%).

$EUTSCHEûSAIDûTHEûTESTSûDIDûNOTûREmECTûTHATû

it had reduced leverage exposures by €90bn

h(EûISûAûHUGELYûRESPECTEDûBANKERûAûSTRATEGICûTHINKERû

someone with extensive international experience”