Credit Suisse boosts IBD headcount by 35%

Deals may be getting pulled and postponed, but investment banks in Asia continue to gear up for what are expected to be better times ahead.

Several banks were caught off guard when the secondary markets started rallying in March last year and many had to meet the massive debt and equity deal flows that followed -- particularly in the second half of the year -- with a manpower still decimated by the downsizing at the height of the financial crisis. Others, notably Barclays Capital and Standard Chartered, have taken the crisis as the starting point for moving into business areas where they weren't previously present.

Consequently, this year has seen a steady stream of hires as firms are trying both to fill vacant positions and add capacity to match the build-up of deals in the pipeline.

One of the banks that has been hiring aggressively this year is Credit Suisse. The Swiss firm came out of the crisis relatively intact with most of its senior bankers in the region still in place, and last year finished second in Dealogic's investment banking revenue ranking for Asia-Pacific ex-Japan.

But Vik Malhotra and Helman Sitohang, who took over as co-heads of the investment banking department for Asia-Pacific in March 2009 when Paul Raphael left the bank, say they still felt something was lacking.

"We had a very strong across-the-board presence, by country and by product. We felt that we were punching above our weight, but we also felt that with the headcount we had, we probably had too much risk of volatility in our performance. We needed to scale up," Malhotra told FinanceAsia in an interview last week.

And so they have. In the first six months this year, Malhotra and Sitohang have increased the headcount within the investment banking department by 35% to complement the existing senior staff. They have also set a target for the bank to be consistently in the top three in the region -- in market share, as well as share of wallet.

So far this year, the bank has added 11 new managing directors in investment banking in the region, of which nine are new hires from rival firms like Goldman Sachs, J.P. Morgan, Lazard, Morgan Stanley, and UBS, and two are internal transfers from London and New York. And the pair say they are in the process of making a decision on one more person shortly.

Asia has changed compared with five to seven years ago in so far as the visibility on deals is much longer now, Malhotra noted. That means you have to identify clients a lot earlier and spend more time working with them to formulate their strategy -- which takes up more resources.

"Clients are also much more active year after year. With the financial crisis, the profile of Asia has become even more elevated. Things are more dynamic and clients have more need for bankers. As a result, bankers are spending more time with each client, while at the same time the client base is expanding fast. So you have to go deeper and broader and the only way to do that is to add more people."

The new MDs include four new additions to the Greater China team: Daniel Qiu, energy and industrials, from Morgan Stanley; Jonathan Shi, M&A, from Lazard; Eric Zhang, metals & mining and industrials, from UBS; and Yehong Ji, industrials, from Citi.

In India, the bank has hired 20-year financial services veteran Vedika Bhandarkar as vice-chairman and head of its investment banking and global markets solutions group for India. Joining from J.P. Morgan in July, she will also be involved in trying to achieve closer integration between the private bank and the investment bank. She was accompanied from J.P. Morgan by Sandeep Pangal, who will become part of the investment banking team. Sumit Jalan, a director, has come on board from Bank of America Merrill Lynch this month as head of India ECM.

The Australia team has been boosted by Mark Carlile, mining coverage, from Morgan Stanley; and Matthew Tehan, head of structured products for Australia. Tehan returned to Sydney in January after a decade with Credit Suisse in New York.

In Southeast Asia, Charles Gunawan has joined from Goldman Sachs as co-head of investment banking for Indonesia; and Carl Bautista has rejoined in Singapore as head of fixed-income structured products, after a stint at running his own financial company in the US.

In January, Richard Tory transferred from London to Hong Kong to become co-head of energy and resources/industrials for Asia-Pacific, with primary responsibility for resources/industrials.

"Now we feel that we are pretty much comparable in size with our key competitors -- maybe still a little bit light, but we are not far off," said Sitohang. "We are comfortable that we can take on any kind of client and product."

A key theme, they believe, will be a pick-up in intra-regional activity, whether it is Chinese companies buying assets in Australia, Southeast Asian companies with Chinese assets looking to list in Hong Kong, or Japanese firms moving into Asia.

"In India we will see companies looking much more eastward, whereas historically they were completely focused on the West, and I think we will see more Indian companies list in Singapore over time, maybe even in Hong Kong," Malhotra said, noting that he sees a lot more Indian businessmen in Beijing and on flights to China these days.

While acknowledging that the market is very competitive for new hires -- "hiring is actually harder than doing a deal" -- the two co-heads say they have boosted their headcount without having to offer two-year guarantees or upfront payments, relying instead on offering well-defined roles and targets and on the added attractiveness of the bank's extensive structured products platform, which gives bankers more products to market to their clients. Bankers are also generally given opportunities to move up the ranks at Credit Suisse and many of the existing employees, including almost all country heads, have been with the firm for a long time, which is appealing to new hires.  

But if someone joins half-way through the year, they probably want some comfort and Credit Suisse does pay "competitively", according to Malhotra. "We don't want to be known as the lowest payer on the street. We want to be a top three firm in the league tables and in terms of client size, and that also means that we want to be among the better payers on the street," he said.

Year to date, Credit Suisse ranks seventh for ECM in Asia-Pacfic ex-Japan, according to Dealogic, 14th for M&A and seventh for investment banking revenues, although admittedly it is only June and volumes have been thin overall so far. Several IPOs have been pulled over the past couple of months, including the $1.2 billion Hong Kong listing of Xingjiang Goldwind Science & Technology, a Chinese manufacturer of wind turbine generators that Credit Suisse was bringing to market earlier this month together with China International Capital Corp and Citi. The rankings could have looked quite different had the markets been more accommodating. Also, if all the Chinese bank re-capitalisation issues that are currently flooding the pipeline do happen, the data are likely to be shaken up again.

Credit Suisse is not on Agricultural Bank of China's IPO, which could become the largest listing in the world if it pulls off a wish to raise more than $22 billion, but it is a bookrunner on Bank of China's upcoming H-share offering of about $8 billion and has pitched -- together with most of its competitors -- for China Construction Bank's rights issue of up to $11 billion. Its China joint venture, Credit Suisse Founder Securities, is also mandated for Industrial and Commercial Bank of China's A-share recapitalisation.

And the two investment banking heads are confident that many of the deals in the pipeline will get executed this year.

"Our strategists are very constructive about the markets," noted Malhotra. "We have gone from a somewhat euphoric sentiment to panic and oversold markets. Now we are adjusting back upwards and that will again open the window. So I think we will see a pretty active September and October."