U.S. Bancorp to Hire in Fixed Income After Bond-Selling Pushby
Firm plowed into investment-grade corporate bond underwriting
It’s now looking to ‘opportunistically’ hire in other units
U.S. Bancorp catapulted its business selling investment-grade corporate bonds up league tables faster than any major rival since the financial crisis, jumping 49 rungs to rank No. 15 this year. That’s just the start of its aspirations in capital markets.
“We’ve really just scratched the surface,” Stephen Philipson, head of credit and municipal fixed income, said in an interview. “There’s a lot of opportunity to grow, especially as competitors, in some instances, rationalize their capital and rationalize where they’re committing capital.”
The Minneapolis-based bank -- the nation’s largest regional lender -- plans to hire “opportunistically” as it expands other services to corporate clients, including in foreign exchange and interest-rate derivatives, Philipson said. That contrasts with the retreat at many global banks that have been shrinking staffs and limiting capital dedicated to fixed-income divisions, which typically handle transactions in debt, currencies, commodities and certain derivatives.
The firm’s progress in U.S. investment-grade corporate bond underwriting illustrates what it aims to achieve. No bank in the nation’s top 20 for that business has climbed as many rungs as U.S. Bancorp since 2008 without a massive acquisition, according to data compiled by Bloomberg.
The firm originated $10.6 billion of that debt in this year’s first half, a 59 percent jump from a year earlier, while handling deals for companies including Caterpillar Inc. and El Paso Electric Co. That compares with a 1 percent decline industrywide. Top underwriter JPMorgan Chase & Co. worked on $88 billion of transactions.
Wells Fargo & Co. has pursued a similar strategy, leaning on its commercial banking strength to build Wall Street operations. The San Francisco-based lender’s takeover of Wachovia Corp. during the financial crisis added bankers ready to offer corporations underwriting and hedging. It then expanded other services and products for those clients.
In currencies, U.S. Bancorp doesn’t make Euromoney’s list of top 10 traders. Ranked by derivatives holdings, an indicator of the business it does with clients, it has hovered in the mid-teens among U.S. banks since the financial crisis, according to data from the Office of the Comptroller of the Currency.
Elizabeth Parra, a U.S. Bancorp spokeswoman, didn’t specify how many people the fixed-income businesses currently employ and said the bank doesn’t have specific targets for how much it will boost their ranks. The broader wholesale banking division’s headcount has climbed about 10 percent since 2009, excluding restructurings. The fixed-income and capital markets staff has almost doubled. Many recruits came with longstanding relationships with corporate clients, Philipson said.
Other regional lenders, such as SunTrust Banks Inc., also have been building out investment bank operations as the Federal Reserve imposes stricter capital requirements on the most systemically important firms to avoid a repeat of taxpayer-funded bailouts. Outside of the most heavily regulated group, U.S. Bancorp is among the largest. Its shares have gained 60 percent since the end of 2008, compared with a 45 percent advance in the KBW Bank Index. They rose 2 percent to $40 at 10:44 a.m. in New York.
“The opportunity for us post-crisis is that we can be competitive,” Philipson said. “It’s given us a real opportunity to step in as a growing player -- where we can take advantage of our low-cost funding and our strong balance sheet -- to be the growing player in a lot of these businesses.”