Goldman Sachs Group Inc. (GS) is in hiring talks with about 10 people as it seeks to expand Australian businesses from trading to capital markets with global banking regulation forcing some competitors to dial back.
Australian fixed-income trading is the firm’s biggest growth area after moving its rates and credit derivatives businesses to Sydney from Hong Kong, said Simon Rothery, chief executive officer for Australia and New Zealand at Goldman. Rothery sees opportunities to arrange debt offerings as competition eases, and also wants to gain the top spot in Australian equity capital markets after naming Sean Walsh to head the unit and adding UBS AG’s Sarah Rennie and Bank of America Merrill Lynch’s Belinda Sara in the past 1 1/2 years.
“We are strategically hiring,” Rothery said Feb. 27 in an interview. “We’re having conversations with probably 10 people in the market in Australia across key businesses, including an upcoming hire of a credit trader.”
Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc are among firms that have pulled back from Australian debt markets after losses during the global credit crisis spurred increasing regulation. Neither Toronto-Dominion Bank nor Royal Bank of Canada held the top rank for arranging Kangaroo bonds last year, the first time in almost a decade, according to data compiled by Bloomberg.
There’s an opportunity to capture more of the market for Kangaroo bonds, or Australian-dollar notes sold by foreign borrowers, Rothery said. The New York-based bank was ranked 14th last year in Kangaroo bond arrangement, and was in 15th position overall managing bond sales in the Australian market, according to data compiled by Bloomberg.
Goldman Sachs was the fourth-largest arranger of offshore bond sales from issuers based in Australia and New Zealand, trailing JPMorgan Chase & Co., Barclays Plc and Citigroup Inc. It is one of four banks managing a U.S. dollar bond sale announced today by Commonwealth Bank of Australia, the nation’s largest lender.
Goldman can also win business through its expertise in structuring more complex transactions and placing them, he said, pointing to last year’s Virgin Australia Holdings Ltd. and Wesfarmers Ltd. leasing deals.
Wesfarmers, Australia’s largest employer, raised about A$304 million in August through a transaction that involved the sale and leaseback of properties in its Bunnings Warehouse hardware store chain. Goldman Sachs along with Westpac Banking Corp. and CIMB Group Holdings Bhd helped manage the sale.
Goldman was also the structuring agent and lead manager for a Virgin Australia debt deal that used a collateralized pool of 24 aircraft in the company’s existing fleet.
Increased global regulation in the banking industry is reducing the ability of lenders to expand credit, Rothery said.
“It’s not the ASX top 200 or 300 that are experiencing the liquidity squeeze, it’s the middle to small businesses which are going to drive employment and growth,” Rothery said. “One of our biggest businesses over the past two years has been the provision of credit to this section of corporate Australia.”
In equity capital markets, where UBS and Macquarie Group Ltd. were the top underwriters last year, Goldman is hoping its expanded presence as a lender to a number of big Australian corporates will help boost its rankings.
Goldman also recently employed Sam Watkins, who previously ran Deutsche Bank AG’s insurance and pension coverage in Australia, for structured equity sales, Rothery said.
“We do lend to a number of the ASX top 50 corporates particularly since the capital markets business is more and more being allocated to lending banks,” Rothery said. “So we’re becoming much more active there.”
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