The News
HSBC is axing most of its investment-banking businesses, joining a long line of lenders who’ve tried and failed to crack Wall Street.
The bank’s new CEO, who took over in September, is shutting down IPO and M&A operations in Europe, the US, and the UK, acknowledging it can’t compete with American firms on their turf, or on its own. HSBC is Europe’s biggest lender but has deep roots in Asia, where it will continue to underwrite deals.
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Liz’s view
Commercial lenders have long tried to brute-force their way into lucrative dealmaking. Only JPMorgan has conclusively succeeded, chaining its huge balance sheet to sexier mandates like M&A. Wells Fargo is trying again. Deutsche Bank barrelled in during the late 1990s and spent two decades tilting at Wall Street’s elite before retreating in 2018. UBS, Barclays, and Citi have all made charges that either failed or stalled.
Meanwhile, Wall Street’s legacy investment banks have flirted with growing their lending businesses, but half-heartedly. Morgan Stanley only occasionally taps the deep pockets of its Japanese partner, Mitsubishi, to write big checks for prized corporate clients. Goldman’s dreams of balance-sheet muscle died along with its consumer bank, Marcus.
Both firms still get by on brains, not brawn. Big companies remain happy to get their money from one bank and their advice from another.
Room for Disagreement
Wells Fargo thinks it can parlay its $220 billion corporate loan book into juicier assignments. It hired a former JPMorgan investment-banking executive, Fernando Rivas, in May, and its pullback in mortgages means it can funnel more of its cash toward corporate clients.
“We’re competing quite well when you look at the results we’ve had as we’ve directed more resources,” CEO Charlie Scharf said last spring. “We still have quite a ways to go relative to the overall plan we have.”