Niche bond firm Greenwich Capital has a mutually beneficial relationship with parent bank Royal Bank of Scotland, as co-CEO Jay Levine explains to Sophie Roell.
Royal Bank of Scotland (RBS) must be thanking its lucky stars that it did not sell Greenwich Capital in 2000, when, after its hostile takeover of NatWest, it found the Connecticut-based bond specialist among the businesses it had acquired. Greenwich mixes Salomon Brothers bond trading talent with New England WASP lifestyle, and in a five-year fixed income boom, it had strength in a slice of the bond market that boomed even more than the rest: real estate.
“Ten years ago I was reluctant to say I was a mortgage trader; now suddenly it’s in vogue,” says Jay Levine, joint-CEO of RBS Greenwich Capital, as the firm is now called. As Americans refinanced their homes over and over again, the firm reaped the benefits.
Expanding market
“We were in the right place – we had a very significant mortgage business and were among the top three or four players – and the market has just expanded unbelievably,” Mr Levine says. Normally profits are not disclosed, but RBS CEO Fred Goodwin let slip during one analysts’ meeting that the firm made £362m in profits in 2003. “2004 was a better year than 2003,” is all Mr Levine will add.
Like many of his colleagues, he is a former Salomon trader. He exudes informality and preaches the virtues of laughter. Outside his office, there are sailing boats. Does the absence of a hard-bitten Wall Street atmosphere affect performance? “I think it enhances it because people don’t leave. Few things hurt performance more than turnover of staff,” he counters.
And this place is not like a typical Wall Street firm: “It’s a very easy place, it’s a very relaxed place, it’s an apolitical place, it’s a place where performance really matters and other things don’t. We believe we have the lowest attrition rate among senior people in the financial services world.”
However casual the atmosphere, after the fusion with RBS, some serious changes are afoot. “As much has happened in the last year-and-a-half as in the previous 23 years of the firm’s existence,” Mr Levine says. Most notable is the move beyond the firm’s traditionally successful businesses, the asset-backed business in which he specialised and the US Treasuries that co-CEO Ben Carpenter used to trade, into corporate bonds, a sector where Greenwich had no presence.
The headline-grabbing hires of big stars are not the only significant changes, though the poaching of John Walsh and Ben Cohen from CSFB did kick off the corporate bond effort. Since then, about 80 people have been hired in the credit markets business. “We made a conscious effort not to take a baby step but to take a giant step in terms of getting it right,” Mr Levine says. The firm’s headcount has risen from 700 to 1000 in about a year. About one-third are transfers from New York, as RBS market activities, such as FX trading, have been moved under the Greenwich umbrella.
Closer work
In addition to his role at Greenwich, Mr Levine took charge of all of RBS’ corporate banking and financial markets (CBFM) operations in North America last year. “Over time, CBFM and Greenwich are working closer together,” he says, adding that it benefits both parties. RBS corporate clients get access to a wider range of products and Greenwich gets more corporate customers.
The kudos that the Greenwich name gives RBS in the fixed income space will be welcome as the UK bank’s US ambitions unfold. It made waves last year, taking over US mid-west bank Charter One to become the sixth largest bank in the country, as measured by assets. A recent barrage of advertising suggests its US ambitions are not yet exhausted.
For Greenwich, meanwhile, the balance sheet of the sixth largest bank in the world (by Tier 1 capital) has been a godsend in an era when, however nifty an outfit, it is getting tougher and tougher to be a small player.
“There’s a consolidation going on among global players, and there’s talk about who is going to survive. Well, RBS is going to be around,” Mr Levine predicts. “The resources it takes to compete today are huge, the clients are expecting major commitments, there’s trading scale – on any given day, we’re clearing $100bn-$150bn of bonds. For that you need a significant balance sheet and a significant parent.”
CAREER HISTORY:
2004: Appointed head of RBS’s CBFM North America operations in addition to co-CEO role at RBS Greenwich Capital
2000: Appointed co-president and co-CEO of RBS Greenwich Capital with Ben Carpenter
1998: Appointed co-head of mortgage and asset-backed departments
1993: Joined Greenwich Capital (now RBS Greenwich Capital) as senior mortgage trader
1986: Joined Salomon Brothers as mortgage trader, later named head of non-agency mortgage trading
1985: Appointed head of structured finance and new products
1984: Joined Freddie Mac
1984: Graduated with BA in Economics from the University of California at Davis and University of Leeds
