Don’t write off the big guns of corporate broking yet

David Hellier
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WHEN Bob Diamond quit Barclays in July, there were many, myself included, who predicted that the bank’s investment business would struggle here on in.

Longer-term that may indeed be the case, but the message so far from the world of UK corporate broking is showing a different story. Two big broking mandates, that of Severn Trent and most recently TUI Travel, have moved to Barclays since Diamond’s demise, taking the banks’ UK client list up to 30.

Corporate broking in itself is not a hugely profitable activity to be in; its raison d’etre for investment bankers, though, is that it begins a relationship with corporates which often leads to advisory positions in merger and acquisition deals, restructurings, flotations and the like, which are profitable, sometimes seriously so.

When TUI Travel changed its brokers a few days ago, it turned to Bank of America Merrill Lynch (BAML), another bank that has had its troubles but which now seems to be recovering its mojo.

New recruit Jonathan Bewes played a principal hand in winning the TUI mate for BAML but it is some of the old stagers at the bank, such as Simon Mackenzie-Smith and Rupert Hume-Kendall, ably supported by Federico Aliboni, who have been keeping its UK corporate broking and equity capital markets businesses top of the UK league table (witness the recent convertible bond issue for Capital Shopping Centres as well as a block trade in Reckitt Benckiser earlier in the year).

On the negative side BAML will have been disappointed to have been kept outside two recent deals from Cairn Energy despite being its broker.

Elsewhere there is much interest in the performance of Jefferies, following its acquisition of Hoare Govett earlier in the year.

As expected many of Hoare Govett’s largest clients have deserted the new set-up, as TUI has just done, but Jefferies has been successful in picking up other clients such as Sirius, Nordgold and Hummingbird.

The bank’s strategy has been to build on its deep sector specialisation in areas such as healthcare, technology, media and telecoms, oil and gas and metals and mining.

It has been active on the deal front, and recently scored a major success in the flotation of Manchester United where it was the lead adviser.

Getting the Manchester United flotation over the line in the US must count as a triumph for Jefferies since countless other banks had tried to do the same and failed. Some argue the bank’s achievement was all the greater since it overcame tremendous cynicism, even from the book-runners on the deal.

When analysing the current corporate broking scene in the UK it is also worth noting that HSBC appears to be testing the water with a view to making its presence felt. It has recently hired Simon Alexander to be a senior figure in corporate broking and there are suggestions that headhunters are in place to try to resurrect the expertise at the bank which it once had in spades after buying James Capel.

Some say HSBC has also run the slide rule over Oriel Securities, to which it has lent a tranche of money.

Although times are extremely tough in investment banking, there are signs of life in some corporate broking departments.

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