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HSBC Stumbles In Bid to Become Global Deal Maker (Wall St. Journal)
Summary: In reaction to lackluster profitability from commercial banking products and the incursion of investment banks competing for share in its core markets such as Brazil, Russia, India, China, the Middle East and Asia-Pacific, HSBC (HBC) began a push into global investment banking in winter 2004. Former chairman Sir John Bond created a 5-year expansion plan, set a two-year budget of almost $1 billion, and hired John Studzinski, former head of Morgan Stanley's European investment banking practice. Studzinski was to work closely with HSBC veteran trader Stuart Gulliver. But after a spending spree hiring bankers from rivals and aggressively seeking deals around the world, costs soared and deals wins were few. Newly-hired bankers blamed HSBC's slow procedures and aversion to risk, such as the absense of a leveraged-finance team. Studzinski left recently. Under Gulliver's sole leadership, HSBC's pre-tax profits from investment banking jumped in the first half of this year by 37%. HSBC has advised on some large deals this year but mostly in a secondary role.
Related links: Full article • WSJ: Videos of Studzinski and Gulliver discussing strategy [I, II, III] • WSJ: Video of Sir J. Bond discussing HSBC's goals • HSBC: Presentation at Merrill Lynch Conference • Global Growth Drives HSBC's First-Half Net Profit • The View from Hong Kong: What to Buy and Sell • Developments in China's Banking Sector
Potentially impacted stocks and ETFs: HSBC's inability to develop its global i-banking business has helped the likes of Credit Suisse (NYSE:CSR), Goldman Sachs (NYSE:GS), Merrill Lynch (MER) and Morgan Stanley (NYSE:MS) expand their business in traditional HSBC markets.
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