HSBC’s global banking and markets unit jumped 8% last year as the UK lender increased fees from dealmaking and maintained trading revenue in most asset classes.
The UK lender posted revenue of $16.1bn for its global banking and markets unit last year, according to its annual accounts. Fees from capital markets and M&A work surged 36%, with HSBC’s investment bank benefiting from a resurgence in debt underwriting revenue.
HSBC’s pre-tax profit of $30.3bn for 2023 was a record for the bank and an increase of 78%, but still below the $34bn expected by analysts. In a statement, chief executive Noel Quinn said that the results “reflected four years of hard work and the strength of our balance sheet in a higher interest rate environment.”
HSBC finished 16th in the investment banking fee league tables last year, according to data provider Dealogic, with 1.3% share of the market. This is up from 17th a year earlier.
The UK lender’s markets and securities services business posted revenue of $9bn, which was largely in line with 2022. However, equity trading fees of $552m were nearly half of the $1bn it earned in the unit in 2022.
HSBC’s GBM business dipped 4% in the final quarter of the year to $3.7bn.
READ HSBC hikes bonuses to $771,700 for its top investment bankers
HSBC has bolstered its UK investment bank over the past year, hiring two senior dealmakers for corporate broking in July, but faces stiff competition from Barclays, which is aiming to consolidate its first place finish in the UK dealmaking fee league tables last year. In recent months, hires within its investment bank have focused on its core markets of China and the Middle East.
Investment banks have struggled against an ongoing drought in deals, with Wall Street banks and Europeans alike posting sharp declines in M&A fees in 2023. UK rival Barclays unveiled a 12% decline in investment banking fees for 2023, led by a 23% slump in revenue from M&A work.
Barclays also unveiled its first investor day since 2014, separating its business into five key units including separating its investment bank from its corporate bank. While the UK lender will look to reduce its reliance on its investment bank, it is not pulling back and within its dealmaking team intends to shift the balance away from debt underwriting to do more M&A and equity capital markets work.
Deutsche Bank’s origination and advisory business was up by 25% in 2023, buoyed by a rebound in debt capital markets activity as its M&A unit slipped 25%. A hiring spree of 50 managing directors at the German lender last year aims to shift the balance of its investment bank towards more M&A and equity capital markets work.
To contact the author of this story with feedback or news, email Paul Clarke
The biggest Wall Street banks cut 30,000 jobs last year, kicked off by Goldman Sachs who informed its staff of plans to make its deepest reductions since the 2008 financial crisis shortly after Christmas 2022.
Goldman’s 3,200 job cuts were swiftly followed by 3,500 at Morgan Stanley, and then 5,000 at Citigroup. Bank of America refrained from deep redundancies, but 4,000 employees departed regardless through its ‘natural attrition’ approach last year.
With the exception of Credit Suisse, which started cutting thousands of roles before being acquired by its biggest rival UBS in March, European banks refrained from deep redundancies last year.
Times have changed.
Whether it’s an attempt to revive a flagging share price, free up funds for buybacks, the march of technology, strategic overhauls or simply reining in costs, top European banks are cutting jobs and reducing bonuses for those that remain.
READ ‘Doughnuts’ loom: Bankers brace for brutal bonus season
“It’s a balancing act for a lot of European banks, particularly after two years of poor performance for investment banking. There’s only so long you can keep paying expensive talent in the hope that revenue will recover,” said Gary Greenwood, a bank analyst at Shore Capital.
Barclays is expected to unveil a strategic overhaul alongside its annual results on 20 February, with the UK lender looking to save £1.25bn in costs. So far, job cuts have mainly hit support functions. Deutsche Bank said that 3,500 jobs will go over the next year, largely in back office functions, as it looks to save €2.5bn after headcount swelled 6% in 2023.
Societe Generale is cutting 900 jobs within its Paris headquarters as part of new CEO Slawomir Krupa’s plans to pull back on costs, while UBS has earmarked around $6.5bn in employee expenses to be stripped out as it integrates Credit Suisse.
On a smaller scale, Rothschild cut around 10 investment banking jobs in January, with former Goldman dealmaker John Brennan departing.
“The US banks are much more reactive in terms of cutting headcount than their European counterparts,” said Stephane Rambosson, co-founder of headhunters Vici Advisory. “European banks are now focused on costs, but each case is specific to their circumstances rather than market conditions. Wall Street banks are also quicker to hire again when the tide turns.”
As well as job cuts, bankers are enduring another brutal bonus round. There is widespread disgruntlement at UBS as the bank spread an already small pool around its existing employees, the influx of Credit Suisse staff and a flurry of senior Barclays dealmakers brought in last year on guarantees, according to bankers.
Barclays has handed zero bonuses to up to a third of dealmakers in some units, bankers told Financial News, with Bloomberg previously reporting that “dozens” of employees were set for doughnuts this year. Deutsche Bank, which also has to digest an expensive hiring spree and its £410m acquisition of City broker Numis, is also set to reduce bonus payments.
READ Investment banks face talent crunch even after deep job cuts
“We have observed a similar, but even more aggressive, trend with the European banks regarding layoffs and bonus pool reductions,” said Chris Connors of Wall Street compensation consultants Johnson Associates. “The European banks have struggled to keep pace with their American counterparts on business results and compensation. From the employee perspective, we anticipate European bankers to be similarly disappointed to US bankers given the muted results in advisory and other units such as underwriting, which are still well below 2021 levels.”
While US banks cut dozens of dealmakers last year, some European players took advantage of the dislocation. Deutsche hired 50 senior bankers, while Santander picked up dealmakers from both the fallout from Credit Suisse’s takeover and from Goldman Sachs and Morgan Stanley.
Most cuts so far at European banks have focused on management or back office functions, and there’s little suggestion that deep investment banker redundancies are on the cards, particularly as banks prepare for a revival in dealmaking activity after a near two-year lull. However, headhunters told FN that many banks were taking a much more cautious approach about bringing in senior talent.
During its fourth quarter earnings call, Deutsche Bank chief executive, Christian Sewing said that the bank had “positioned ourselves for a recovery in origination and advisory” after its hiring spree. “Now, this is where we see considerable growth potential,” he added.
“Investment banking is a people business, so banks will be reluctant to let too much talent depart,” added Greenwood. “This could change — a recovery is possible, but there are still a lot of risks in the market.”
To contact the author of this story with feedback or news, email Paul Clarke
Mariner Wealth Advisors, one of the nation’s most acquisitive wealth managers, is buying two institutional consulting firms with a combined $104 billion in assets under advisement to form the nucleus of a new unit catering to institutional clients.
The acquisitions will nearly double Mariner’s AUA, which the firm said was $122 billion at the end of last year.
Mariner has agreed to buy Winter Park, Fla.-based AndCo Consulting and Covington, Ky.-based Fourth Street Performance Partners in a simultaneous transaction. It plans to merge the two firms, which serve government, corporate, and nonprofit institutional clients.
Mariner said it expects to close the transaction in early April but didn’t disclose deal terms and declined to provide an AUA breakdown of the firms it is acquiring.
The two firms will operate under a new Mariner Institutional brand, according to Mariner.
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“The complementary nature of our clients and services will support our joint growth and offer existing clients and prospects additional services that will help enhance the overall client outcome,” said Marty Bicknell, CEO and president of Mariner Wealth Advisors.
The acquired firms will retain their 100 professionals and continue serving clients out of locations in Covington, Ky., Winter Park, Fla., Chicago, Dallas, Detroit, Pittsburgh, Cleveland, and Reno, Nev.
Founded in 2006 and based in Overland Park, Kan., Mariner has grown into one of the nation’s largest registered investment advisor firms by aggressively recruiting advisors and acquiring other firms. The firm had $65.9 billion in assets under management, according to its most recently filed Form ADV with the Securities and Exchange Commission.
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Mariner is backed by private-equity firm Leonard Green & Partners.
Write to Andrew Welsch at andrew.welsch@barrons.com
Published: Jan. 23, 2024 at 7:51 a.m. ET
By Dominic Chopping
STOCKHOLM–Intrum said late Monday that it will sell the majority of its investment portfolio to affiliates of Cerberus Capital Management for 8.2 billion Swedish kronor ($783.8 million).
The Swedish debt collector said the deal will see a portfolio of mainly unsecured assets acquired by an entity in which Cerberus will…
By Dominic Chopping
STOCKHOLM–Intrum said late Monday that it will sell the majority of its investment portfolio to affiliates of Cerberus Capital Management for 8.2 billion Swedish kronor ($783.8 million).
The Swedish debt collector said the deal will see a portfolio of mainly unsecured assets acquired by an entity in which Cerberus will hold a 65% stake and Intrum will hold 35%.
“This transaction is an important step that will allow us to de-lever our balance sheet, while maintaining exposure to the asset,” said Intrum Chief Executive Andres Rubio. “The transaction is an important step to a more capital-light business model – reduced balance sheet intensity while leveraging our servicing capabilities and increasing our highly valued recurring-servicing income.”
Net proceeds will be used to reduce debt upon completion, expected during the first half of 2024.
Write to Dominic Chopping at dominic.chopping@wsj.com
Investing in nature to address climate change, support biodiversity, and protect ocean health—and more—is expected to reach record levels this year in response to more regulation and market demand, according to Cambridge Associates, a global investment firm.
Still, the amount of private capital invested to support natural systems will fall far short of what’s needed, according to the annual “State of Finance for Nature” report published in December from the United Nations Environment Programme.
A big reason is that nearly US$7 trillion in public and private finance was directed to companies and economic activities in 2022 that caused direct harm to nature, while only US$200 billion was directed to so-called nature-based solutions, or NbS—investments that protect, conserve, restore, or engage in the sustainable management of land and water ecosystems, as defined by the United National Environment Assembly 5, or UNEA5, the report said.
“Without a big turnaround on nature-negative finance flows, increased finance for NbS will have limited impact,” it said.
But the report also said that the misalignment “represents a massive opportunity to turn around private and public finance flows” to meet targets set by the United Nations Rio Conventions on climate change, desertification, and biodiversity loss.
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The conventions aim to limit climate change to 1.5 degree Celsius above pre-industrial levels, protect 30% of the earth’s land and seas by 2030, and to reach “land degradation neutrality” by 2030. Reaching those goals will require more than double the amount of current levels of nature-based investing by 2025, to US$436 billion, and nearly triple today’s levels to US$542 billion by 2030, the report said.
Most of the US$200 billion invested in NbS today is by governments, but private investors contributed US$35 billion—including US$4.6 billion via impact investing funds and US$3.9 billion via philanthropy. The largest source of private finance was in the form of biodiversity offsets and credits. [An offset is designed to compensate for biodiversity loss, while a credit is the asset created to restore it].
Many wealthy individuals and families concerned about climate change and the environment so far have focused their investment dollars on climate solutions and innovations in technology and infrastructure, or in technologies supporting food and water efficiency, says Liqian Ma, head of sustainable investment at Cambridge Associates.
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But “increasingly there is growing awareness that nature provides a lot of gifts and solutions if we prudently and responsibly manage nature-based assets,” Ma says.
Investments can be made, for instance, in sustainable forestry and sustainable agriculture—which can help sequester carbon—in addition to wetland mitigation, conservation, and ecosystem services.
“Those areas are not in the mainstream, but they are additional tools for investors,” Ma says.
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Finance Earth, a London-based social enterprise, is among the organizations working to make these tools more mainstream by creating a wider array of nature-based solutions in addition to related investment vehicles.
Finance Earth groups nature-based solutions into six themes: agriculture, forestry, freshwater, marine/coastal, peatland, and species protection. Supporting many of these areas are an array of so-called ecosystem services, or benefits that nature provides such as absorbing carbon dioxide, boosting biodiversity, and providing nutrients, says Rich Fitton, director of Finance Earth.
Each of these ecosystem services are behind existing and emerging markets. Carbon-related disclosure requirements (at various stages of approval in the U.S. and elsewhere) have long spurred demand for carbon markets, the most mature of these markets.
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Cambridge Associates, for instance, works with dedicated asset managers who have been approved by the California Air Resources Board to buy carbon credits, Ma says.
In its annual investment outlook, the firm said California’s carbon credits should outperform global stocks this year as the board is expected to reduce the supply of available credits to meet the state’s emission reduction targets. The value of these credits is expected to rise as the supply drops.
In September, the G20 Task Force on Nature-Related Financial Disclosures released recommendations (similar to those put forward several years ago by the Task Force for Carbon-related Financial Disclosure) that provide guidance for how companies can look across their supply chains to assess their impact on nature, water, and biodiversity “and then start to understand what the nature-related risks are for their business,” Fitton says.
The recommendations will continue to spur already thriving biodiversity markets, which exist in more than 100 countries including the U.S. In the U.K., a new rule called “Biodiversity Net Gain” went into effect this month requiring developers to produce a 10% net gain in biodiversity for every project they create.
Though developers can plant trees on land they’ve developed for housing, for example, they also will likely need to buy biodiversity credits from an environmental nonprofit or wildlife trust to replace and add to the biodiversity that was lost, Fitton says.
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This new compliance market for biodiversity offsets could reach about £300 million (US$382 million) in size, he says.
Finance Earth and
are currently raising funds for a U.K. Nature Impact Fund that is likely to invest in those offsets in addition to other nature-based solutions, including voluntary offset markets for biodiverse woodlands and for peatlands restoration.
The fund was seeded with £30 million from the U.K. Department for Environment, Food and Rural Affairs—money that is designed to absorb first losses, should that be needed. The government investment gives mainstream investors more security to step into a relatively new sector, Fitton says.
“We need the public sector and philanthropy to take a bit more downside risk,” he says. That way Finance Earth can tell mainstream investors “look, I know you haven’t invested in nature directly before, but we are pretty confident we’ve got commercial-level returns we can generate, and we’ve got this public sector [entity] who’s endorsing the fund and taking more risk,” Fitton says.
Since December 2022, when 188 government representatives attending the UN Biodiversity Conference in Montreal agreed to address biodiversity loss, restore ecosystems, and protect indigenous rights, several asset managers began “creating new strategies or refining strategies to be more nature or biodiversity focused,” Ma says.
He cautioned, however, that some asset managers are more authentic about it than others.
“Some have taken it seriously to hire scientists to do this properly and make sure that it’s not just a greenwashing or impact-washing exercise,” Ma says. “We’re starting to see some of those strategies come to market and, in terms of actual decisions and deployments, that’s why we think this year we’ll see a boost.”
Fitton has noticed, too, that institutional investors are hiring experts in natural capital, recognizing that it’s a separate asset class that requires expertise.
“When that starts happening across the board then meaningful amounts of money will move,” he says. “There’s lots of projects there, there’s lots of things to invest in and there’ll be more and more projects to invest in as more of these markets become more and more mature.”
Published: Jan. 8, 2024 at 2:19 a.m. ET
By Joe Hoppe
Home REIT said it collected 12% of the rent invoiced for the month of December, after investment manager AEW UK Investment Management made further progress obtaining control over its assets from non-performing tenants.
The real-estate investment trust said Monday that auction sales have continued, having agreed sales on a further…
By Joe Hoppe
Home REIT said it collected 12% of the rent invoiced for the month of December, after investment manager AEW UK Investment Management made further progress obtaining control over its assets from non-performing tenants.
The real-estate investment trust said Monday that auction sales have continued, having agreed sales on a further 81 properties for 16.4 million pounds ($20.9 million) in December, with completion expected in January.
Total borrowings were reduced to GBP172.7 million, from GBP198.3 million a month prior. The company’s cash balances at Dec. 31 stood at GBP15.8 million, of which GBP5.4 million is unrestricted.
Home REIT had said in early September that AEW engaged with all of its tenants and carried out a number of actions to begin inspecting and valuing its portfolio. It said the manager was focused on stabilizing Home REIT’s property portfolio and financial condition, and planned to maximize income and capital returns.
Write to Joe Hoppe at joseph.hoppe@wsj.com