HSBC Stumbles In Bid to Become Global Deal Maker
Conflicts Over Strategy, Costs
Have Bank Battling Itself
Instead of Its Competitors
'Sound of Music' and Santana
LONDON -- Just before Christmas 2004, John Studzinski, the co-head of HSBC Holdings PLC's new investment bank, warned his bankers how intensely they needed to chase big deals to transform the company into a top global player.
"There has to be an element of urgency, an element of guilt, an element of competition, an element of 'I'm responsible,'" said the banker, known in London financial circles as Studs, according to a video recording of the event.
Less than two years later, HSBC has pulled back its ambitions dramatically. Mr. Studzinski and some senior bankers he hired are gone, and HSBC remains in the lower tier of investment banking. Meanwhile, top investment banks increasingly threaten to steal business from HSBC and other conventional banks.
HSBC's struggle illustrates the upheavals in global banking, as the big-money, high-risk culture of Wall Street forces traditional banks to compete on new ground. Big bank mergers have created multinational institutions able to provide plain-vanilla banking such as corporate and consumer loans and cash management. Those services are now so commonplace that they command only the slimmest of profits. So traditional banks like HSBC are scouting for new sources of revenue, often investment banking.
Meanwhile investment banks Morgan Stanley, Merrill Lynch & Co., Credit Suisse Group and Goldman Sachs Group are expanding into some lucrative overseas markets, such as Brazil, Russia, India and China. "A lot of our competitors, European and American banks, have moved into effectively what has been the homeland of HSBC," Stuart Gulliver, then co-head of HSBC's investment-banking and capital-markets division with Mr. Studzinski, told investors in May. "They've built up in the Middle East, they've built up in Asia-Pacific, they've got China fever."
FROM THE STUDZINSKI/GULLIVER PRESENTATION
Also in the December 2004 presentation, John Studzinski and Stuart Gulliver, co-heads of HSBC's investment-banking business, talked about strategy.
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Mr. Studzinski talks about winning big deals. (1:05)
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Mr. Gulliver talks about hiring talent from rival banks. (1:05)
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Messrs. Studzinski and Gulliver discuss employment and why some bankers won't make the cut at HSBC. (0:51)
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HIGH | LOW (Player required)HSBC stumbled as it tried to catch up to big investment banks by aggressively seeking major deals all across the globe, while hesitating to loosen its tight lending standards and or bust budgets hiring new personnel. The bank's new platoon of merger advisers were stymied because HSBC balked at services that deal customers demanded, such as riskier financing. When costs soared but merger and advisory business didn't follow, the bank started scaling back.
For most of HSBC's 141-year history, its international reach was enough. Founded in Hong Kong by Scottish shipping superintendent Thomas Sutherland in 1865 to finance trade between Europe, China and India, HSBC's banking business paralleled the British Empire and then kept growing. It now offers loans and money-management services to companies and branch-banking, loans and credit cards to consumers in 76 countries.
But in 2003, with its global advantage shrinking, then-chairman Sir John Bond began to push HSBC into investment banking -- advising on mergers, underwriting stocks and bonds, and issuing more complex derivatives. Sir John, whose 45 years in HSBC banking and mane of white hair gave him a patrician presence, signed off on a bold departure: a five-year investment-banking expansion plan and a budget of at least $800 million for the first two years.
To lead the charge, he turned to Mr. Studzinski, an American banker who had helped lead Morgan Stanley's European investment bank. Announcing the move, Sir John acknowledged that HSBC rarely hired for such a senior position from the outside. He called Mr. Studzinski, who was born in Boston, a "very natural fit." Mr. Studzinski, 50 years old, was paired at the helm with Mr. Gulliver, a 26-year HSBC veteran steeped in the bank's culture of cost-control, who had managed the bank's trading operation in Asia.
It wasn't an obvious match. Mr. Studzinski, active in London society and U.K. charities, earlier this year held a 50th birthday party for himself at Salzburg's Leopoldskron Palace, which was used as the von Trapp family residence in "The Sound of Music." The celebration included a choral work commissioned by an arts foundation Mr. Studzinski founded. It describes the choral piece, performed at a nearby church, as "a contemplation about the universal presence of angels in all our lives."
The 47-year-old Mr. Gulliver, who is partial to the rock bands U2 and Santana, carries the tough-guy demeanor of a lifelong trader. His recent reading included a book by a British army officer titled, "Rules of Engagement: A Life in Conflict."
Mr. Studzinski was in charge of the merger and advisory business and the business of helping companies sell stock and debt. Mr. Gulliver was responsible for expanding sales and trading, and for beefing up the bank's ability to offer derivatives and other specialized financial products to corporate clients.
At the outset, they both spent lavishly, especially Mr. Studzinski as he raided competitors to build a team from scratch. In March 2004, Mr. Studzinski hired a European technology banker from Credit Suisse. The next month he raided Credit Suisse and Goldman Sachs for consumer and retail bankers. In July, he hired a health-care banker from Lazard Frères.
In some cases, Mr. Studzinski offered bankers guaranteed bonuses for two years, an unusual step in an industry where annual bonuses typically are determined by financial performance the same year. In all, he and Mr. Gulliver hired some 2,000 people in a little more than a year.
At the end of 2004, Messrs. Studzinski, Gulliver and Sir John were upbeat at a gathering for their investment bankers. Sir John clinked his glass to hush the room and told the bankers of his "absolute conviction" that they were building "the premier investment-banking and markets business in the world," according to the video. He added, "I don't care how fast we get there as long as we do it right."
Mr. Gulliver brashly suggested HSBC could benefit because of regulatory problems that a big competitor, Citigroup Inc., was facing. He joked Citigroup might have problems paying staff, "given the extent to which it hasn't got any money because of the fines it's paid."
But HSBC's bankers struggled to win deals, and the bank stood at 16th in the 2004 global merger-advisory rankings by deal value, compiled by the markets data provider Dealogic. Meanwhile, the aggressive hiring pushed the investment bank's costs up 32% from the year before, to $5.8 billion.
Mr. Gulliver, despite his initial spending, grew increasingly unhappy about the escalating expenses, people familiar with the matter say. He privately complained to others about Mr. Studzinski's strategy and the amount of spending, according to a former senior HSBC employee. Messrs. Gulliver and Studzinski declined to comment. On his side of the business, Mr. Gulliver began pulling back on costs. For instance, consulting firm A.T. Kearney had delivered a 200-page plan for expanding HSBC's equities business. Mr. Gulliver called for scaling the plan back by about 30%.
Meanwhile, HSBC lacked heft in other areas crucial to winning merger business. Leveraged finance -- loans accompanied by high-yield or "junk" bonds -- was in high demand amid a surge of private-equity investment. But the bank didn't quickly hire a team to handle that. The bank was concerned about risky debt and wanted an experienced team, but worries about costs delayed hiring decisions, said people familiar with the situation. When HSBC bankers asked for help arranging leveraged-finance deals, they were told to be patient. This spring, HSBC finally hired two leveraged-finance bankers from Morgan Stanley.
FROM SIR JOHN BOND'S SPEECH
Sir John Bond talked in December 2004 about the goals for HSBC's corporate, investment bank and markets business. (1:55)
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HIGH | LOW (Player required)Some of the newly hired merger bankers found the bank's lending process also slowed them down and put them at a disadvantage. At HSBC, bankers had to fill out a form and send it to the credit department at headquarters in London's Canary Wharf financial district, according to one former executive. Typically, in arranging financing for deals, investment bankers make their case in person to a credit committee that understands the investment-banking business and can make a quick decision. Pierre Goad, an HSBC spokesman, said, "We regard our independent credit department as a strength, not a weakness."
Some of the new investment bankers chafed because they worked from cramped cubicles or desk areas, as was usual at HSBC, rather than individual offices. Bankers making millions had to go to a conference room to have a private phone call.
Meanwhile, cooperation suffered between HSBC's new investment bankers and its traditional bankers in each country, who could provide on-the-ground intelligence and valuable introductions for the investment bankers. A former banker said officials observed tensions between Mr. Studzinski and Mike Smith, the CEO of HSBC's Asia-Pacific operations. This person said Mr. Smith felt Mr. Studzinski was encroaching on his turf. A bank spokesman declined to comment on behalf of Mr. Smith. Through a spokesman, Mr. Studzinski also declined to comment.
HSBC struggled to add research to its offerings. Mr. Studzinski wanted to do it, but Mr. Gulliver and others found it problematic because it is an expense that they didn't think would produce revenue.
In one case, an investment banker sought to influence an HSBC researcher's investment analysis, something U.S. banks had agreed to stop in 2003 as part of their settlement with New York Attorney General Eliot Spitzer and U.S. regulators. (HSBC wasn't part of that agreement because it had virtually no equity research at the time.) In August 2005, an HSBC banker emailed a research analyst, instructing him to not publish an opinion critical of an important banking client, Emirates Airline, according to a copy of the email reviewed by The Wall Street Journal. "I am aware of the concerns that the note has raised within [Emirates] and wish to avoid creating relationship damage," the email said.
HSBC's Mr. Goad said the analyst's opinion was published and the email was brought to the attention of HSBC's compliance department. Mr. Goad said the sender of the email was told it was inappropriate but no disciplinary action was taken.
By mid-2005, concern over the unit's ever-rising expenses was forcing the bank's hand. In the first half of the year, total operating income for the business rose just 3.6% from the year-earlier period, but costs rose another 24% to $3.32 billion. Pre-tax profit at the unit fell by 18%.
HSBC's chief executive Stephen Green began taking a hard line on new spending. He started vetting investment-banking hires himself and some job offers were put on hold, according to a person familiar with the situation. Through a spokesman, Mr. Green declined to comment.
On Aug. 1, 2005, Sir John and Mr. Green unexpectedly announced that most of the expenditures to build up the investment bank had been made. "Future cost growth will consequently be lower," Sir John wrote in a report to investors. It was two years into what the bank had flagged as a five-year plan. The 2005 budget for the research department was sliced by about $35 million, or 17%, to $165 million. Sir John declined to comment.
In November, Sir John announced he would retire the following May, shortly before he turned 65. The move was long-planned, but it removed Mr. Studzinski's chief supporter among senior management. Sir John's successor as chairman was Mr. Green.
In February, Mr. Studzinski was relieved of many of his responsibilities, which were given to Mr. Gulliver. In May, Mr. Studzinski announced he would leave in September to become a mergers and acquisitions adviser at New York-based private-equity firm Blackstone Group. There was no dramatic ending or "Arthur Miller" moment, he said in an interview at the time. "This was not 'Death of a Salesman.'"
Last month, Mr. Studzinski organized his going-away party, attended by HSBC executives, at the 175-year-old London theatrical club called The Garrick Club, once the scene of a famous quarrel between Charles Dickens and William Makepeace Thackeray. This week, his 20th-floor office became a meeting room.
Others hired by Mr. Studzinski have headed for the exits. Bankers for telecommunications, retail, and technology -- all of them hired as part of the investment-banking push -- have left. The bank calls the turnover normal. "During the same period, how many people left Goldman? How many people left Morgan Stanley?" says Mr. Gulliver. "'Tis the nature of the business."
HSBC has been an adviser on a number of big acquisitions recently, but mostly in a secondary role providing extra financing. For example, it is one of six banks advising Mittal Steel Co. NV in its acquisition of Arcelor SA, valued at about $30 billion, helping boost its place in Dealogic's investment-banking rankings by deal value to 13th for the first nine months of this year. But Goldman Sachs is the lead adviser on that deal, and those lower down the pecking order get paid far less.
The unit's most-recent results, pre-tax profits for the first half of 2006, rose 37% compared to the first half of 2005, to $3.14 billion, helped by the sale of derivatives. Mr. Gulliver says that shows that as the sole head of the division, he's going in the right direction. "My job has been to build something that works for HSBC," he says.
汇丰跻身全球顶级投行的努力受挫
2004年圣诞前夕，汇丰控股(HSBC Holdings PLC)新投行部门的联席主管杜绍基(John Studzinski)曾向他的银行家们强调，他们要不断捕捉大交易，使汇丰跻身于全球顶级投行之列。
然而在不到两年后，汇丰的雄心壮志已逐渐消退。杜绍基以及经他聘用的很多高级银行家先后离职，汇丰的投行业务也始终徘徊在低端领域。与此同时，来势凶猛的几家顶级投行却正在从汇丰及其他传统银行的手中抢夺业务。
从汇丰的困境中不难看出，全球银行业已发生天翻地覆的变化。华尔街大资金、高风险的运作风气正迫使传统银行加入新兴领域的竞争。很多大银行相互兼并，组建了可提供公司贷款、消费者贷款和现金管理等一系列一般银行业务的跨国机构。如今此类服务随处可见，所产生的利润也微不足道。所以汇丰等很多传统银行都纷纷寻找新的收入来源，而它们普遍将焦点放在了投行。
与此同时，摩根士丹利(Morgan Stanley)、美林(Merrill Lynch)、瑞士信贷集团(Credit Suisse Group)和高盛(Goldman Sachs Group)等知名投行正在进军海外利润丰厚的市场，巴西、俄罗斯、印度和中国等都成为他们的关注重点。“我们的很多竞争对手，包括欧洲和美国的银行已经不知不觉地潜入了汇丰的领地，”汇丰投行和资本市场部另外一位联席主管欧智华(Stuart Gulliver)在5月份对投资者说。“在中东、亚太，到处都有他们的足迹，他们对中国业务更是狂热。”
汇丰一方面在全球范围内大张旗鼓地争取大交易，另一方面又不愿放宽严格的贷款标准或者摆脱预算的束缚聘用更多有识之士，结果，汇丰赶超顶级投行的愿望最终受挫。由于该行在高风险融资等客户急需的业务上畏首畏尾，新组建的并购咨询队伍也未能找到用武之地。当成本上升而并购和咨询业务未能同步增长时，汇丰开始收缩阵地。
在汇丰控股141年的发展中，它庞大的全球网络从来无庸置疑。1865年，为帮助欧洲、中国和印度间的贸易融资，苏格兰一家海运公司的总管托马斯?萨瑟兰(Thomas Sutherland)在香港成立了汇丰，很快，汇丰的银行业务就如同大英帝国的版图一样迅猛扩张。目前，该行的企业贷款和理财服务，以及消费者贷款、信用卡等业务已经遍及76个国家和地区。
但在2003年，汇丰的全球化优势受到了严峻挑战，董事长庞约翰(Sir John Bond)开始推动汇丰进军投行领域－－为企业并购提供咨询，承销股票和债券，发行更为复杂的金融衍生品。在45年的汇丰经历以及他两鬓的白发为庞约翰赋予了特别的贵族气质，一个雄伟计划很快在他手中敲定：为期五年的投资银行扩张计划和前两年至少8亿美元的预算。
为了推行他的发展大计，庞约翰请来了曾经担任摩根士丹利欧洲投行业务主管的杜绍基。庞约翰在宣布这一任命时承认，汇丰很少从外部聘请高层管理人。但他说杜绍基是一个非常合适的人选。新投行部门就由50岁的杜绍基和在汇丰效力26年、熟谙汇丰成本控制体系的欧智华共同掌管。欧智华此前曾掌管汇丰的亚洲交易业务。
但杜绍基与欧智华的组合并不匹配。一直活跃在伦敦社会和英国慈善机构的杜绍基在今年初选择了萨尔兹堡利物浦斯康城堡庆祝自己的生日，这里曾经是电影《音乐之声》(The Sound of Music)中冯特拉普(von Trapp)一家的府宅。由他本人创办的一家艺术基金会还专门为此创作一个合唱作品，并在附近的一家教堂进行了表演。这个作品被描述为“对我们生命中无处不在的天使的默祷。”
而现年47岁的欧智华则对摇滚乐队U2和Santana情有独衷。他一直以雷厉风行的个性着称。他最近正在读一本英国军官写的书，书名是“交战法则：冲突中的生活”(Rules of Engagement: A Life in Conflict)。
杜绍基主要掌管并购和咨询业务以及股票和债券承销业务。欧智华则负责拓展销售和交易业务，以及增强汇丰为企业提供衍生品及其他特别专用金融产品的能力。
起初，他们都是一掷千金，特别是在杜绍基从竞争对手中挖人组建投行队伍的时候就更是如此。2004年3月，杜绍基从瑞士信贷集团请来了一位欧洲科技业投行人士。次月，他又从瑞士信贷和高盛挖走了几位跟踪消费者和零售行业的银行家。7月，从Lazard Freres聘请了专注于医疗保险行业的银行家。
杜绍基在这两年中屡屡兑现了当初对银行家们的奖金承诺，这在年度奖通常与业绩表现挂钩的投行业并不常见。在一年多的时间里，杜绍基和欧智华为汇丰增聘了2,000多人。
2004年底，杜绍基，欧智华以及庞约翰在召开投行人士聚会时信心十足。聚会的录像带显示，庞约翰举起酒杯，对投行人士们说，他对建立一个优质的投行及市场业务“绝对有信心”。他补充说，我不在乎我们实现目标的速度，只要我们的方向正确就好。
欧智华颇有自信地暗示，花旗(Citigroup)正面临众多监管问题，汇丰很可能成为受益者。他开玩笑说，花旗付工资可能都要成问题了。
但汇丰并未如愿以偿地赢得太多交易。市场数据供应商Dealogic的数据显示，以交易价值排名，汇丰2004年在全球并购咨询排行榜上仅排到第16名。与此同时，大张旗鼓地招兵买马让这家投行的成本较上年同期猛增32%，达到58亿美元。
据知情人士称，尽管欧智华最初也对支出不屑一顾，但慢慢地却开始对费用的上升感到不满。汇丰的一位前高级雇员表示，欧智华私下里曾经对人抱怨过杜绍基的战略以及公司的支出规模。欧智华和杜绍基均拒绝就此置评。
在他自己的业务范围内，欧智华开始紧缩开支。例如，咨询公司A.T. Kearney曾经为汇丰列出了长达200页的股票业务扩张计划。但欧智华主张砍掉其中的30%。
与此同时，汇丰在有助于带来并购业务的其他领域也毫无建树。随着私人资本投资之风日益盛行，以高收益债券或垃圾债券作担保的杠杆融资受到了客户的广泛青睐。但汇丰却未能很快建立业务团队。据知情人士称，汇丰对高风险债券感到担心，并且想组建一个经验丰富的队伍，对成本增加的担忧使人才招聘决策一拖再拖。很多汇丰投行人士向内部寻求安排杠杆融资交易方面的帮助时，得到的答 却是，耐心一点。今年春季，汇丰最终从摩根士丹利挖走了两位专于杠杆融资的投行人士。
一些新来的并购银行家发现，汇丰的贷款程序也导致公司业务进展缓慢，并将他们置于不利地位。据一位前管理人士称，在汇丰，银行家们办理业务前必须填写一个表格，把它发给位于伦敦Canary Wharf金融区的总部信贷部。但业内的通常做法是，投行人士在安排交易融资时要亲自向信贷委员会提出申请，这个委员会一般都熟悉投行业务，并且能够迅速作出决定。汇丰发言人皮埃尔?戈德(Pierre Goad)表示，我们把独立信贷部门看作我们的优势，而不是弱点。
一些新聘的投行人士还经常因为工作间狭窄而产生摩擦，汇丰的工作空间一贯相对小小，员工很少拥有独立的办公间。这些年薪几百万的银行家有时候就连打一个私人电话都要去会议室。
另外，在汇丰内部，新的投行人士与每个国家能够为他们提供珍贵的当地信息及介绍的传统银行家合作并不愉快。一位曾经在汇丰供职的银行家说，管理层发现杜绍基与汇丰亚太业务总监迈克?史密斯(Mike Smith)之间关系非常紧张。这位人士称，史密斯感觉杜绍基的行为已经超出了他的权限。杜绍基通过发言人表示拒绝就此置评。
2005年中期，对投行子公司成本不断增长的担忧迫使该行采取了行动。上半年该子公司运营利润总额仅较上年同期增长3.6%，但成本却再增24%，达到33.2亿美元。该子公司税前利润下降了18%。
汇丰首席执行长葛霖(Stephen Green)开始对新增支出严加控制。据知情人士称，他开始亲自审核投行部门的人员招聘，一部分职位被搁置。葛霖通过发言人表示拒绝就此置评。
2005年8月1日，庞约翰和葛霖意外宣布用于组建投行部门的大部分支出均已到位。“因此未来的成本增长将有所下降，”庞约翰在一份致投资者的报告中称。而这时该行高调推出的投行业务5年计划才刚刚执行了两年。2005年的研发预算被砍掉3,500万美元，至1.65亿美元，削减幅度达到17%。庞约翰拒绝就此置评。
11月，庞约翰宣布将于次年5月退休，因为他马上就要步入65岁。庞约翰的退休计划由来已久，应早在人们的意料之中，但这却使杜绍基失去了高级管理层中一个最坚实的支持者。葛霖接过了庞约翰的董事长职位。
2月，杜绍基被卸下多项管理职责，转交欧智华处理。5月，杜绍基宣布将于9月离职，转投纽约私人资本运营公司Blackstone Group担任并购顾问。他在当时接受采访时表示，这里没有戏剧化的结局，也没有亚瑟?米勒(Arthur Miller)时刻，这不是《推销员之死》(Death of a Salesman)
上个月，杜绍基在伦敦有175年历史的嘉里克文学俱乐部(Garrick Club)举办了自己的告别晚会，并获得多位汇丰管理人士的捧场。本周，他在20层的办公室被改装成了会议室。
其他经杜绍基聘任的投行人士也纷纷离职。在投行部门大张旗鼓扩张的过程中增聘的很多电信、零售和科技行业银行家均已离开。不过汇丰对此泰然自若。欧智华表示，“这段时间里，高盛有多少人离职？又有多少人离开摩根士丹利？这对企业来说很正常。”
汇丰最近担任了几项大型并购交易的顾问，但主要起辅助作用，只提供额外资金。例如，它是为米塔尔(Mittal Steel Co. NV)收购阿赛洛(Arcelor SA)提供咨询的6家银行顾问团成员之一。该交易价值300亿美元，这也帮助提高了汇丰在Dealogic投行排行榜中的名次。在今年前9个月的排名中，汇丰上升到第13位。不过高盛担任了该交易的牵头顾问，其他低级别顾问的收入远远比高盛少得多。
2006上半年财年，受衍生产品销售额增长的推动，该子公司税前利润较上年同期增长了37%，至31.4亿美元。欧智华说，这说明作为该子公司目前的唯一主管，他的路线是正确的。“我的职责一直是做一些对汇丰有益的事情，”他说。
Carrick Mollenkamp
