People
&Markets
Banks braced for Brexit no-deal challenges
International investment banks operating in
London are largely prepared if the UK leaves
the European Union on October 31 without
concluding a withdrawal agreement, with
many saying they have planned for the
WORST
CASEûSCENARIOûFORûMANYûMONTHS
“We have always planned on the basis of a
HARDû"REXIT vûSAIDû3EVERINû#ABANNES ûDEPUTYû
CHIEFûEXECUTIVEûANDûHEADûOFûGLOBALûBANKINGû
and investor solutions at SOCIETE GENERALE.
h$EPENDINGûONûTHEû"REXITûlNALûAGREEMENTûORû
not, there will be a possible hit in the markets,
but we do not think it will be a big issue for us.
We remain committed to the UK, which is
REmECTEDûINûOURûPLANûTOûOPENûOURûNEWûBUILDINGû
in Canary Wharf in October,” he said.
4HEû&RENCHûBANKûHASûLONGûRUNûAûDUAL
HUBû
OPERATION ûWITHûSIGNIlCANTûNUMBERSûINûBOTHû
London and Paris.
But if there is no agreement between the UK
ANDûTHEû%5ûûBYû/CTOBERû ûBANKERSûSELLINGûTOû
EU clients will have to be based in the EU,
meaning some staff will move across to Paris.
Major rival BNP PARIBASûIDENTIlEDûEARLIERû
this year those who will have to move to the
CONTINENTûFORûTHISûPURPOSEû4HOSEûBANKERS û
BELIEVEDûTOûNUMBERûABOUTû ûHAVEûNOTûYETû
MOVEDûACROSSû)TûEMPLOYSûNEARLYû ûINûTHEû
UK overall.
h7EûAREûONûSTANDBYûATûTHEûMOMENTû4HEû
teams who will need to move to the
continent are still in London, but we are
prepared and can move fast – if and when
needed. Everything is ready,” said Philippe
"ORDENAVE ûCHIEFûOPERATINGûOFlCERûATû".00“OPERATIONAL CHALLENGES”
!TûNATIXIS, which has a much smaller operation
INû,ONDONûEMPLOYINGûûPEOPLE ûTHEûûSTAFFû
IDENTIlEDûHAVEûALREADYûMOVEDûTOû0ARISûORûOTHERû
OFlCESûONûTHEûCONTINENTû4HEûLICENCESûREQUIREDû
TOûMAKEûTHEû5+ûOPERATIONûAûTHIRD
PARTYûBRANCHû
of its French business were obtained last year.
4HEû"ANKûOFû%NGLANDûISûALLOWINGûBANKSûTOû
branch into the UK from overseas locations.
Britain had been originally due to leave at
THEûENDûOFû-ARCHû ûBUTûTHATûWASûEXTENDED
Financial industry bodies have urged
regulators to allow temporary transition
arrangements to be in place to cope with
ANYûDISRUPTIONû4HEû5+Sû&INANCIALû#ONDUCTû
!UTHORITYûSAIDûITûWILLûALLOWûSUCHûMEASURESûTOûBEûINûPLACEûUNTILûTHEûENDûOFû
But even the timing of the departure date
could prove problematic. October 31 is a
4HURSDAYûANDû.OVEMBERûûISûAûPUBLICû
holiday in several European countries,
meaning the change could prove more
chaotic than if it occurred over a weekend.
h4HISûWILLûGIVEûRISEûTOûADDITIONALû
OPERATIONALûCHALLENGES ûINûPARTICULARûMID
WEEKûCODEûRELEASEûFORûNEWûREPORTINGûASûlRMSû
will not have a weekend in which to switch
OVERûSYSTEMS vûSAIDûINDUSTRYûBODYû!&-%
Lawyers have also highlighted employment
ANDûTAXûISSUESûASûBEINGûIMPORTANTûFACTORSûINû
how banks have chosen to relocate some of
THEIRûOPERATIONSûFROMûTHEû5+ûTOû%5ûûLOCATIONS
3YLVIEû,Eû4ANNEUR ûTAXûLAWYERûATû#-3 ûSAIDû
lRMSûNEEDûTOûCONSIDERûIFûTHEYûWOULDûHAVEûTOû
PAYûTAXûONûANYûPOTENTIALûCAPITALûGAINûINCURREDû
by moving assets from a UK entity to one on
THEûCONTINENTûh3OMEûTAXûAUTHORITIES û
including HM Revenues & Customs, have
looked into this and some clients have sought
reassurance from them to see if they are liable
FORûTAXûONûSUCHûTRANSFERS vûSHEûSAID
Christopher SpinkM&A boutiques look to Q4 for rebound
!FTERûAûBRUISINGûSECONDûQUARTER ûINVESTMENTû
banking boutiques are looking to the second
half – and the fourth quarter in particular –
to make up for lost revenue.
h4HEûWORLDSûGETTINGûBETTER vûSAIDûMOELIS
CHIEFûEXECUTIVEû+ENû-OELISûONûAûCALLûWITHû
ANALYSTSûONû4UESDAYûh)TûSEEMSûLIKEûANIMALû
spirits in the world, and the desire for
people to do transactions is improving
marginally every week. So I could see the
fourth quarter being strong.”
/FûTHEûlVEûPUBLICLYûTRADEDûINDEPENDENTû
investment banks, only PJT PARTNERS and
EVERCORE had reason to smile in the second
quarter. LAZARD, Moelis and GREENHILL were
ALLûDOWNûSIGNIlCANTLYûINûTHEûSECONDû
quarter from a year ago, which they
blamed on a combination of weakness in
Europe and the overall slowdown in deal
mOWûASûCLIENTSûTRYûTOûWAITûOUTûMARKETû
uncertainty.
4HEûINDEPENDENTûBANKSûBROADLYûHADûAû
BETTERûQUARTER ûWITHûREVENUEûFALLINGûûINû
AGGREGATEûCOMPAREDûWITHûAûDECLINEûOFûûINû
ADVISORYûREVENUEûFORûTHEûlVEûLARGESTû53û
banks. Revenue from independent banks
WASûENHANCEDûATûMOSTûlRMSûBYûINCOMEûFROMû
restructuring assignments.
PJT EXCEEDS
0*4SûREVENUEûINûTHEûQUARTERûJUMPEDûûTOû
US$133m.
h&OURûYEARSûAGO ûTHISûlRMûDIDNTûEVENû
EXIST vûSAIDû0*4û#%/û0AULû4AUBMAN ûWHOû
FOUNDEDûTHEûlRMûAFTERûLEAVINGû-ORGANû
Stanley and later merged it with
Blackstone’s restructuring shop.
h4ODAY ûWEûAREûAûDESTINATIONûFORûBEST
IN
class talent at all levels. We’re advising a
GROWINGûROSTERûOFûBLUE
CHIPûCLIENTSûONûTHEIRû
most important strategic matters.”
4HEûBANKûISûEXPECTINGûTOûADDûlVEûNEWû
partners in the third quarter, including one
WHOûWILLûFOCUSûONûCROSS
DIVISIONALûINITIATIVES û
4AUBMANûSAID
%VERCOREûREPORTEDûAûûINCREASEûINû
SECOND
QUARTERûREVENUEûCOMPAREDûWITHûAû
year ago.
Greenhill suffered another brutal quarter,
WITHû1ûREVENUEûFALLINGûûFROMûAûYEARûAGOû
TOû53Mû)TSûREVENUEûFELLûûINûTHEûlRSTû
quarter. It was the only bank to miss
ANALYSTSûEXPECTATIONSûINûTHEûPERIODûANDûTHEû
EXPECTATIONSûWEREûLOW
4HEûSTEEPûDECLINEûRESULTEDûFROMûAû
combination of factors, said Greenhill CEO
Scott Bok, including a slow start to the year,a lack of large transaction completions and
PARTICULARûWEAKNESSûINû%UROPEANû-!
Bok said the bank had respectable
PERFORMANCEûINû53û-!ûANDûIMPROVEDû
PERFORMANCESûINû!USTRALIAûANDû,ATINû
!MERICA ûBUTûITûWASûNOTûENOUGHûTOûOFFSETûTHEû
low level of activity in Europe.
h4HEûIMPROVEDûPACEûOFû-!ûDEALûACTIVITYû
has continued for us in the third quarter,”
Bok said. “Given this rebound in announced
DEALûACTIVITYûxûWEûCONTINUEûTOûEXPECTûAûSOLIDû
revenue performance for the full year.”
Investors are likely to brush off
'REENHILLSûUPBEATûEXPECTATIONSûFORûTHEû
second half, said UBS analyst Brennan
(AWKENûh!FTERûTWOûBACK
TO
BACKûWEAKû
quarters, we suspect the market will treat
[Greenhill’s] revenue as a ‘show me’ story,”
Hawken said in a note.
Moelis also saw a sharp decline in the
QUARTER ûWITHûREVENUEûFALLINGûûTOû53Mû
"UTûTHEûBANKûSTILLûBEATûEXPECTATIONS
“We’re encouraged by the increased pace of
CLIENTûACTIVITYûWEûHAVEûEXPERIENCEDûINûTHEûPASTû
SEVERALûMONTHS vûSAIDû+ENû-OELISûh7EûEXPECTû
OURûSECOND
HALFûPERFORMANCEûTOûBEûMUCHû
STRONGERûTHANûTHEûlRSTûHALFûOFûTHEûYEARv
Philip Scipio