This could be a good moment for investment bankers at HSBC and B of A to head for the exits.
HSBC's shareholders are pushing for the bank a) to sell, or b) to close the investment bank. And according to the Financial Times, Bank of America chief exec Ken Lewis says the "probability of changes and elimination of some businesses...is very high".
The two banks have a few things in common. Both are universal banks more at home in the comfy world of corporate banking than the cut-throat investment banking community. Both are strong in their respective patches - Asia for HSBC and the US for Bank of America. And both had big aspirations in European investment banking which have come to little or nothing. HSBC began building up its i-banking operations in 2003 with the hire of John Studzinski, an ex-Morgan Stanley banker, and various of his cronies. Meanwhile, this time last year B of A's Lewis announced plans to spend $400m (€304m) to boost its capital markets business in Europe and Asia over the next three to four years.
In the third quarter of this year, both HSBC and Bank of America ranked outside the top 20 for European M&A, according to Thomson Financial. HSBC ranked fifth for European and Middle East debt issuance in the first half, according to Dealogic, and outside the top 10 in ECM. Bank of America ranked outside the top 10 in both European DCM and ECM.
Some of the top talent has upped and left already. HSBC lost John Studzinski to Blackstone in 2006, while Daniel Palmer, its head of capital markets, left in May. Bank of America saw the back of JC Perrig, its head of capital markets in 2006, along with others such as Kenneth Leet, its then head of European investment banking. One B of A employee told us recently that there was "nothing going on" and "2007 is all about keeping your job."
With B of A in particular now likely to pay dire bonuses (and HSBC renowned for not paying particularly great bonuses anyway), the rout may now get worse. But whether bankers remaining at either institution will find it particularly easy to make a move is open to question.
"Younger guys at Bank of America won't have seen much dealflow. And whatever dealflow they have seen is probably stuff that other people in Europe haven't wanted to touch," says one senior headhunter.
HSBC juniors in areas like corporate finance are seen to be similarly unappealing: "The energy and power teams and the FIG teams [at HSBC] are good, but the rest are negligible," says one search consultant.
However, another headhunter says HSBC tends to be a good hunting ground for more experienced staff: "They recruited quite a few good senior bankers, and some are still left."