Following a decision by Bank of America to build a European presence, Arrington Mixon talks to Geraldine Lambe about the reasons behind the decision and how the bank approached putting together its European team.

If a picture paints a thousand words, then real estate tells an equally compelling story. Bank of America’s move at the end of 2003 to a shiny new tower in London’s Canary Wharf, therefore, shows that it means business – both in its investment banking and capital markets ambitions, and in its European push. Virtually surrounded by the competition, Bank of America (BoA) has been building up its army of foot soldiers. In the past year more than 100 have joined BoA’s European ranks, constituting about a 10% increase of the bank’s London-based European platform. And there is more to come.

“There is a greater sense of urgency and opportunity regarding our European build-out,” says Arrington Mixon, BoA’s head of international debt, who moved to her current role two years ago from her previous job as head of syndicated finance in the US.

“Bank of America decided that the time was right to build a European franchise that serves European clients, but at the same time to ensure that it was seamlessly connected to our powerful US franchise. That’s why I was asked to come over – I have a long history with the bank and understand its thought processes,” says Ms Mixon.

Underpinning the European expansion are BoA’s key philosophies as frequently articulated by the bank’s chairman and CEO, Ken Lewis: focus and discipline. These principles shape the European business’s product and geographical strategy. The firm is keen to enhance what it sees as core competencies in derivatives and FX, and to continue building the key areas of debt capital markets (DCM) and investment banking.

Ms Mixon says there is a strong emphasis on strengthening the financial institutions group (FIG) and the bank has managed to lure some high-level staff from bulge-bracket firms. Last September, Alberto Piedra joined from Goldman Sachs as head of FIG and, in February, more Goldman expertise was leached away as Mark Oldcorn left to join BoA’s FIG as managing director on the capital structuring side.

“The FIG space, across all products and competencies, will be a very big part of our push in 2004. It is a huge percentage of the market wallet in Europe and so we are building that side of the business more rapidly,” says Ms Mixon. “It is about integrated asset-liability coverage across banking, DCM and sales. Our hiring strategy will build out across each of these areas,” she says.

Key areas

The bank is already a strong player in derivatives and structured products – Ms Mixon describes them as mainstay profit centres for BoA. And Alexis Renard’s appointment last month as global head of European medium-term notes (MTN) trading and origination, also from Goldman Sachs, will go a long way to boosting the firm’s structured MTN business.

In another profitable area for the bank, Ms Mixon says that BoA has just had its best quarter ever across all products in European FX; however, she declines to put any quantitative flesh on the bones.

“Combined, these products make us a very strong risk management house,” she says. “We are strong and profitable globally, and we will continue to build this as a cornerstone of our European business.”

Building the team

Where BoA has been seriously lacking is in capital raising. It has had little visibility in Europe, but has moved to plug these gaps too. For example, Michael Coppock joined as head of FIG DCM last month from Citigroup; he reports to JC Perrig, head of European DCM, who joined from Credit Suisse First Boston (CSFB) a year ago. “We are working hard to increase our visibility in capital raising. It is a front-line sector and will feed into our risk management business,” says Ms Mixon.

As a whole, she says Europe is very profitable and is meeting targets, but some products are clearly more mature and profitable than others. “Several of our strongest areas – derivatives, FX, structured products and distressed debt – are, to a degree, enabling us to self-subsidise by helping us to build out in other areas. But this strategy will pay dividends in the long run as it will help to take the risk management businesses to the next level.”

Leveraged finance, in which BoA had virtually no European presence last year, is seen as another critical work-in-progress, and Rommie Bhutani, another CSFB veteran, was hired in March to co-head financial sponsors/leveraged finance origination. “We plan to replicate our strengths in the US – in high yield, leveraged loans, mezzanine finance and financial sponsors – as we see the appetite for these products growing in Europe,” says Ms Mixon. “Equally, our US clients are building out in Europe and they want to engage with us here. We have thoroughly analysed the risks and opportunities and are ready to expand the team to around 10 people. Over the next year, you should see the results.”

This tactic illustrates an essential part of the BoA strategy: to leverage off its US business at the same time as differentiating its European presence. “The credibility, credit rating and financial strength of the US platform is critical in gaining European clients,” says Ms Mixon.

Client focus

The virtuous circle that BoA aims to create involves bringing US clients to the euro market (such as Ford’s €1bn 2.5-year floating rate notes in July last year), taking European clients to the US dollar market (such as Cadbury’s $2bn global bond in March 2003) and to build out into the local market independently (such as the UK’s National Grid Company’s €600m five-year eurobond, last September).

The “discipline” mantra is clearly married to its “focus” counterpart. For example, Ms Mixon says that the bank has streamlined its client base to ensure that they are well served across all the bank’s areas of expertise. The focus is now on just under 200 issuer clients (about half are financial institutions) and most are also covered by the firm’s sales team.

The balance sheet is there to support the business, but its application is reserved for key clients. “Of course we have made some use of the balance sheet to build the investment banking business – but it is focused on strategic clients. As we grew our investment banking presence in the US, for example, we actually shrank our balance sheet. It will be growing in Europe, but in a very disciplined way.

“It’s a question of balancing market presence with overall profitability,” says Ms Mixon.

European push

Serious effort has clearly been put into building the European platform, but it has failed to lift the bank’s presence in the league tables for international bond issues. It has, however, paid off in the bank’s targeted areas. For example, according to Dealogic’s 2003 figures, BoA lies third for taking European corporates to the US bond market and seventh for taking all European issuers to the dollar market.

Ms Mixon says: “We have really been focusing on developing in selected areas, rather than trying to be all things to all people. In the areas we are building, we have seen a marked improvement in performance over the past 18 months. Since 2002, the number of international transactions done [all deals outside the US], has tripled both in terms of volumes and in the total number of transactions done. While in percentage terms of total market issuance, this may still seem small, it shows that the strategy we are pursuing is working.”

Although BoA Europe is still under construction, Ms Mixon says the firm’s aim is to have its principal hires in place by the end of the second quarter. Anyway, she says, the European business is “ahead of plan” both financially and in terms of putting the team in place.

Has it been easy to attract the right people? “In the beginning it was a little difficult but, as we got key hires in place, it became easier and easier. It soon became clear to people that we are very serious about what we are doing. People are also keen to join a growing shop, where there is clearly an entrepreneurial spirit. It’s a very dynamic environment,” she says.

It’s a great place to be, says Ms Mixon. “When we began a couple of years ago, we asked competitors how they marketed against us. They told us that they didn’t really need to. Now competitors are telling me that we have crept up and that they need to watch out. We want to be seen as a threat.”

Career history: Graduated Phi Beta Kappa from the University of Virginia’s economics programme and holds a degree in finance from Northwestern University’s Kellogg Graduate School of Management. Serves on Bank of America’s Europe, Middle East and Africa operating committee and global debt operating committee.

2002: Moved to London to run Bank of America’s debt businesses.

2001: Named head of syndicated finance, responsible for syndicate, sales, trading and research.

2000: Named head of syndicated debt capital markets and co-head of leveraged finance.

1991: Joined Bank of America’s syndicated finance business and was part of the team that built the group into a market leader inthe industry.

1982: Joined Bank of America as a management trainee.

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