James Spencer agenda

The head of the financial institutions group for the Americas at Credit Suisse is keen to focus on the bank’s collaborative strengths as it moves on from its own difficulties and responds to changing market conditions. Marie Kemplay reports.

It has been a turbulent few years for Credit Suisse, given that the bank has “been in the headlines more than we would have wanted”, reflects James Spencer, head of the financial institutions group (FIG) for the Americas. “The focus now is about building on, and investing in, our franchise,” he adds.

Following a period during which a spotlight was shone on risk management practices after the collapse of large family office Archegos and supply chain financer Greensill, both significant Credit Suisse clients, there have been a number of staff departures across the bank, including at CEO and chairman level, and reputational challenges have been weighing on morale. 

Although Mr Spencer acknowledges the difficulties created by such departures and faced by many team members who have stayed put, he is keen to stress that Credit Suisse has continued to deliver for its clients throughout this period.

“As an employee, of course it’s tough to see those kinds of headlines, but I do think that we are often more sensitive to it than our clients,” Mr Spencer says. “Those kinds of circumstances do prompt clients to ask some questions, but the main thing they want to know is whether or not we remain committed to the financial institutions business, and clearly that is the case.”

He comments that after a number of new hires, the FIG team in the Americas is back up to full strength. “I’m excited about where we are. We’ve enhanced the team and invested in areas that are important to us, such as the merger and acquisition (M&A) and coverage sides, and in verticals like insurance, as well as investing in the junior team.”

Collaborative approach

Mr Spencer also points to the strong coordination between the FIG team and the rest of the investment bank as an important factor in its offering. “One of the strengths of our platform is the collaboration and level of commitment with our product partners,” he says, highlighting leveraging capabilities such as Credit Suisse’s structured products team, its financial sponsors and leveraged finance teams, “where we’re a top three player”, and its Wall Street research team, “which has been fully built out”. These capabilities feature alongside the full range of investment banking capabilities such as M&A, debt capital markets and equity capital markets (ECM).

This collaborative approach means the bank is well prepared to respond to significant trends taking place in the market. “We’re seeing a lot of convergence right now in a number of different areas,” observes Mr Spencer. This includes in the alternative asset management sector where there are “a lot of alternative asset managers that are talking about going public, buying other businesses and exploring financing options”, which Credit Suisse’s financial sponsor coverage and leveraged finance teams are well placed to serve. For example, there is a push by the alternative assets sector to bolster balance sheets with permanent capital vehicles, in which acquisitions within insurance are often seen as an attractive option.

On the banking side of the FIG business, Credit Suisse’s clients are also benefitting from the bank’s drive to diversify its business models, which provides opportunities to explore acquisitions in areas such as speciality lending, fintech, wealth management and payment services. “That’s a big area of focus for us,” says Mr Spencer. “Our collaborative nature enables us to have those conversations seamlessly.”

Remaining active

He also acknowledges that market conditions have changed substantially over the past nine months compared with a boom period of capital markets activity during 2021. “It’s clearly a tougher market for ECM and leveraged finance,” he says. However, the team remains active in investment-grade debt issuance and has a strong M&A pipeline.

“On the investment-grade side, the level of engagement and activity has been really busy. We continue to punch above our balance sheet weight there,” he says. “Globally we’ve been doing four investment-grade deals a week on average this year.” Examples from recent months include supporting issuances for multiple banks such as Bank of Montreal, CIBC and Toronto-Dominion, American Express, BNY Mellon, Capital One, Pacific Western Bank and Schwab in the US, as well as for insurers such as Liberty Mutual, Metlife and Prudential.

In M&A, the bank has also seen an “extremely busy” time, Mr Spencer says, citing its recently announced advisory mandates. These include the merger of American Express Global Business Travel with special purpose acquisition company Apollo Strategic Growth Capital, ICE’s acquisition of software and data analytics provider Black Knight, which is due to complete early next year, and the merger of S&P Global and IHS Markit, which completed in late February.

Mr Spencer is gratified that despite the market headwinds and the reputational challenges faced by Credit Suisse, the team has continued to deliver strong results. “It highlights the resilience of our business and I’m excited to build on that and to continue to engage with clients on strategic assignments,” he says.

M&A dynamics

Given the changing market conditions, Mr Spencer reflects that M&A deals in the pipeline may take longer to come to fruition. This is due to factors such as higher financing costs, particularly in the high-yield section of the market, which can make completing deals more challenging or make potential returns less attractive. In addition, falling share price, while perhaps increasing appeal for buyers, may give sellers pause for thought. “These dynamics and changes in expectations take some time to work their way through the market, but as they do we expect to see more deals announced, and there is activity underway out there,” he says.

Mr Spencer also suggests that it is not out of the ordinary for M&A processes, particularly those involving large, strategic deals, to be “a year or more in the making from start to finish”. One example is Citi’s divestitures of its consumer banking businesses in Asia. Although the high-level intentions were announced in April 2021, the sale of its businesses in Indonesia, Malaysia, Thailand and Vietnam to United Overseas Bank is expected to complete in the coming months, and the sale of its Indian business to Axis Bank is not due to complete until early next year. In both deals, Credit Suisse advised the buyers.

The shifting regulatory backdrop, particularly in the US, around M&A deals is an area that market participants, including Mr Spencer, are watching closely. One key element is the US government’s intervention last year in the planned $30bn takeover deal by insurance firm Aon of Willis Towers Watson (Credit Suisse advised Aon). “There is certainly more scrutiny around antitrust,” as well as more robust messaging coming from the administration and regulators, particularly around larger deals, he says.

There are also a number of large bank transactions that the industry is watching with interest. “Time will tell. I think some of the announced delays have been more idiosyncratic than there being negative sentiment towards financial institution deals generally,” says Mr Spencer. “I think the bigger cloud hanging over bank M&A is share price performance, rather than any regulatory overhang. But in both cases, we remain cautiously optimistic about the market.”

Although falling share prices create challenges, Mr Spencer points out that with prices dropping “in some sub-sectors of FIG there are assets that looked expensive a year ago, but don’t look as expensive now, and that does create the possibility for more opportunistic transactions.” In this kind of environment, he stresses the importance of remaining “nimble” and maintaining that collaborative approach in order to chase the opportunities that are coming up. He also emphasises the importance of having one eye on current market conditions, but continuing to plan for the long term as well. 

“Some of the trends I have highlighted are longer-tailed in nature, and one needs to have an eye beyond what’s coming up over the next three months, or the next six months, in positioning a business,” he says. He adds that ultimately what the bank is aiming for is “a steady stream of ideas and market intelligence, so we can be topical with our clients. It’s an exciting time and we need to be closely connected, both with our clients and internally, so we can maintain our approach.”


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