Investment Banking awards 2007 -

Awards / Investment Banking Awards

Banker Editor | 1/10/2007 12:00 am

This year’s Investing Banker Awards come at a tricky time for the industry, when liquidity is scarce and markets are nervy. It is at times like these that banks must show their mettle. The Banker Awards 2007 reward such qualities, and we look back over an impressive year for all of its winners, during which innovation and commitment have driven growth.

THE JUDGES:

Sir David Arculus Also a judge at last year’s awards, Sir David is non-executive director of Pearson, Barclays and Telefonica. He was chairman of O2 until it was acquired by Telefonica. Previous roles have included managing director of Emap, chief operating officer of United News and Media, chairman of Severn Trent and chairman of Earls Court and Olympia. In his early years at Emap, he launched many magazines, including Smash Hits!, the pop music magazine that went from a circulation of 10,000 to one million within a year, helping to transform the company from a regional newspaper group into an extensive publishing house.

Dr Jerome Booth Head of research at Ashmore Investment Management and a member of the investment committee. He was previously head of market research at ANZ Investment Bank with global responsibility for fixed income and foreign exchange research. He was part of the buy-out group establishing Ashmore in 1998-99. He holds three degrees, including a doctorate in economics from Oxford, and was a lecturer in economics at Christ Church, Oxford.

Brian Caplen, Editor, The Banker.

Brandon Davies Managing director of the Global Association of Risk Professionals Risk Academy and GARP’s operations in Europe. He produced two books on Basel II and risk management, which form the basis of GARP’s certification programme in banking risk and regulation. The books are used by banks and central banks in several countries. Mr Davies has more than 30 years experience in the banking sector. His previous positions include head of retail market risk and deputy group treasurer at Barclays Bank, and managing director of financial engineering and later of structured products at BZW.

Geraldine Lambe, Capital markets and investment banking editor, The Banker.

Bernard Oppetit Chairman and chief investment officer of Centaurus Capital. Prior to joining Centaurus, he was global head of equity derivatives at Paribas in London until the Paribas merger with Banque National de Paris in May 2000, following which he was head of risk arbitrage at BNP Paribas in London.He joined Paribas in Paris in 1979 and in 1987 transferred to New York as a risk arbitrage trader before becoming global head of risk arbitrage in 1990. He is a graduate of the École Polytechnique in Paris.

Carl Piccolo, Director Head of fixed income syndication at Standard Bank. He has been looking at all product classes for the past eight years. His expertise lies in emerging markets with particular focus on the Commonwealth of Independent States, eastern and central Europe and Latin America. Previously, he spent five years at WestLB working on Latin American fixed income origination.

GLOBAL INVESTMENT BANK OF THE YEAR

CREDIT SUISSE On August 2, Credit Suisse announced its Q2 results. The investment bank reported record income of CHF2.5bn ($2.1bn) before tax – a 94% rise from Q2 the year before. For the first half of the year, pre-tax income from investment banking activities was up by 89% at CHF4.4bn, and by a staggering 208% on Q2 2006. The happy news came from every part of the business: fixed income trading revenues were up by 29% for the first half (69% up from Q2 06); equity trading revenues were up by 44% (116% up from Q2 06); H1 advisory fees had risen by 55%, equity underwriting fees by 29% and debt underwriting by 35%.

These would be rewarding statistics at any bank; at Credit Suisse they are the sign of a complete turnaround. Only a few years ago, market participants questioned whether Credit Suisse’s investment bank could endure. Even its then CEO recommended that it merge to survive. It had yet to recover from the disastrous and expensive acquisition of Donaldson, Lufkin & Jenrette, and the burden of the high cost base with which it was saddled during the downturn. At its nadir, in 2002, the bank lost $1bn.

But those days are long gone. The most recent restructuring – aimed at creating an integrated bank and focusing on the institution’s strengths – was interpreted by many in the market as a coded message that the bank would become more of a niche player; it has instead been revitalised. At the end of 2006, the bank ended the year in sixth place for global investment banking revenues, seventh for global mergers and acquisitions (M&A), fourth for global initial public offerings (IPOs) and fifth for global high yield and leveraged loans, according to Dealogic. When he became CEO in 2004, Brady Dougan promised to more than double earnings to $2.5bn by 2007. By 2006, investment banking profits had been more than tripled to $4.8bn.

“We set out our strategy in 2004, stating our objectives for the integrated bank across all three businesses and, within that, for the investment bank. We have stuck to our plans and our focus and have exceeded those targets a year ahead of time,” says Mr Calello.

The first element of the strategy was to leverage off its market-leading businesses by extending their reach to new geographies. For example, the leveraged finance business was particularly strong in the US, so the plan was to extend that capability first to Europe and then to Asia. Testament to the success of that strategy, the bank is now top of Dealogic’s league tables in the Asia-Pacific region.

But it was never a niche strategy, says Mr Calello. “The second focus of the strategy was to grow businesses that were already strong but needed further investment to increase market share or to close gaps, such as prime brokerage, cash equities and derivatives. The final element was to identify new businesses, whether markets such as Kazakhstan and Vietnam, where we are now a leading player, or new products such as those in the sustainable business arena; for example, we expanded our carbon trading business by acquiring 10% of Ecosecurities about four months ago.”

Mr Calello says the priorities for the bank will be much the same in the coming 12 months: leveraging existing strengths, expanding and filling any gaps, and diversifying revenue streams. “For example, we are continuing to build the commodities business with further investment and key hires. In derivatives, we had let a leading position slip, so the management team is focused on regaining that. And emerging markets, a strength of the firm, will continue to be a big focus for us.”

The integrated bank strategy continues to pay dividends for all parts of the business, says Mr Calello, who was group CEO in Asia-Pacific before taking up his current post. “It’s an increasingly important advantage and differentiates us. Eight per cent of net new assets in the first half of the year are the result of collaboration between bankers in different parts of the business and more than a third of IPOs led to private banking relationships. Investment banking clients have private banking needs, and increasingly sophisticated private banking clients are looking for investment banking-type products; it’s not difficult to see the synergies there.”

Equally important, Credit Suisse has worked hard to eliminate operational weaknesses. Where once it was seen as a firm with low operating leverage and a volatile risk profile, now Mr Calello says it has a tight rein on costs and risk management. General and administrative expenses had been cut by 14% in Q2 (versus Q2 last year), and pre-tax income margins had been increased from 29% to 33.2% in the same period. Spiralling compensation costs are a thing of the past: in Q2, the compensation/ revenue ratio continued to decline, from 53.5% in 2006 to 51.5% this year.

“Driving efficiency has been critical to our success,” says Mr Calello. “Part of that has been delivered by creating centres of excellence to manage global operations in everything from IT, product development, financial control to front- office functions, such as research and analytics.”

Risk and capital management remain key priorities, with or without financial markets crises. “Even before the current turmoil, we had been taking a very disciplined approach to capital allocation and risk management, and I think that had been recognised by the market. We have made a clear commitment that clients will come first before our principal interests and that is proving more important than ever. In the sort of challenging market conditions that we are currently experiencing, that commitment to clients is paying off. Also, our expertise in credit and in leveraged finance is a significant advantage to us in these markets.”

CHIEF INFORMATION OFFICER OF THE YEAR

ANTHONY McCARTHY, DEUTCHE BANK

To highlight the increasingly important process of aligning a financial business’s strategic vision with its information technology, for the second year running, we are awarding a CIO of the Year Award. The financial world is undergoing metamorphosis through globalisation and commoditisation. The CIO, as a leader and expert in IT infrastructures, is now critical to driving the banking industry forward as front, middle and back offices alike are all under pressure to embrace development of their technology platforms. The relationship of the chief executive officer and the CIO has become an important part of gaining competitive advantage through the successful utilisation of IT; co-ordination of this relationship requires strong leadership and co-operation within the firm.

Back in 2005, Deutsche Bank reformed its global IT management team to consolidate its IT infrastructure across asset classes and Anthony McCarthy became global CIO of investment banking technology within the bank’s Corporate and Investment Bank.

Following a peer group vote of CIOs from 15 of the top global investment banks, The Banker is proud to announce that Anthony McCarthy has been voted CIO of the year for 2007.

Mr McCarthy’s responsibilities span the full range of application technology needs for many of the businesses across Deutsche Bank, including global markets, operations, finance, risk management and compliance.

Prior to joining Deutsche Bank in 1997, Mr McCarthy spent 12 years at Morgan Stanley, where he held a number of IT management positions in New York and Tokyo.

INVESTMENT BANK OF THE YEAR/AMERICAS: JPMorgan

INVESTMENT BANK OF THE YEAR/ASIA-PACIFIC: UBS

INVESTMENT BANK OF THE YEAR/EUROPE, MIDDLE EAST and AFRICA: Merrill Lynch

INVESTMENT GRADE BOND HOUSE OF THE YEAR: Barclays Capital

COVERED BONDS HOUSE OF THE YEAR: Barclays Capital

CONVERTIBLES HOUSE OF THE YEAR: Credit Suisse

HIGH YIELD BOND HOUSE OF THE YEAR: Credit Suiss

M&A HOUSE OF THE YEAR: Goldman Sachs

IPO HOUSE OF THE YEAR: UBS

EQUITY TRADING HOUSE OF THE YEAR: UBS

BOND TRADING HOUSE OF THE YEAR: JPMorgan

EQUITY DERIVATIVES HOUSE OF THE YEAR: Société Générale