While colossal global banks like Citigroup seem to have cemented their control of the fixed-income markets, don't tell that to the increasingly ambitious Royal Bank of Scotland Group, which wants nothing less than a prime seat at the U.S. fixed income table.

RBS Greenwich Capital Markets, RBS's wholly-owned subsidiary, has vaulted in the asset-backed securities league tables so far this year, nabbing eighth place in the first-quarter U.S. ABS chart, up from 13th place in first-quarter 2002. Its underwriting volume is also up in U.S. mortgage-backed securities this year, although that market's full-speed-ahead issuance has boosted the fortunes of all underwriters. The heavy competition knocked RBS down to 11th from seventh place last year, even though it underwrote $11.1 billion compared with $10.9 billion.

The bank is not content, however, to be stranded in the lower echelons of fixed-income underwriters. It is undertaking an ambitious build-up strategy across the board in fixed income: In addition to its ongoing campaign in securitization, it is trying to beef up areas such as fixed-income derivatives. Down the road, it may push for a greater presence in corporate debt underwriting, where RBS Greenwich is currently a marginal player.

"Our goal is to become an increasingly important market force in fixed income," said Douglas Greenig, head of mortgage trading for RBS Greenwich. "Our goal is to be the best - we're not interested in being second tier."

Lower-ranked underwriters have not voiced those types of ambitions lately. In a debt world ruled by giants (Citigroup and JPMorgan Securities, for example, controlled 27% of the U.S. ABS market in the first quarter), the typical strategy for lower-ranked players has been to find niches and build client relationships, rather than break the bank in a bid to gain league table status.

That's not good enough for the Greenwich, Conn.-based firm. It wants to play in the same league as its New York competitors in fixed income, and has enough fiscal clout to make that goal reachable. For starters, parent bank RBS is in solid fiscal shape and has escaped many of the market downturns and scandals afflicting U.S. institutions. What's more, the parent seems willing to extend its sub the capital it needs to make markets, and RBS Greenwich in turn has been paying up for substantial hires, nabbing top derivatives and MBS/ABS pros from its higher-ranked rivals.

"It's a good environment for us because we're focused on fixed income, and as a consequence of this focus we've been able to grow," Greenig said. "Some other firms that have a very large investment banking business have experienced some sharp contractions lately, and so are less able to take advantage of the opportunities that exist for growth in fixed income."

RBS's recent earnings momentum "has been aided by a strong organic performance, combined with M&A synergies," said Credit Suisse First Boston analyst Michael Lever in a recent report on parent RBS. "This has allowed the bank to absorb significant increases in mainly corporate provisions."

The key issue for RBS, Lever added, is maintaining "above-average revenue growth in more challenging and competitive markets."

A blueprint for growth

It has been a long journey for Greenwich, which began operations in 1981 and entered a volatile period when NatWest Group purchased it in 1998. After that purchase, Greenwich obtained expanded Tier 2 powers that enabled it to underwrite and deal in a wider variety of fixed-income products, such as corporates and CMBS. In 2000, Royal Bank of Scotland acquired NatWest, and installed Ben Carpenter and Jay Levine as co-chief executives of the renamed RBS Greenwich Capital.

Greenig credited Carpenter and Levine as being the prime movers of the decision to ramp up in debt. "From the time they took over, there has been a steady push for growth," he said. "RBS has provided a wonderful platform for us. We have all the tools we need to achieve our mission."

One aspect of this mission is to build up a large-scale operation in interest-rate derivatives, which, as in most areas of the debt capital markets, have increasingly become popular methods of hedging issuer and underwriter risk. RBS recently nabbed two Morgan Stanley veterans as part of this expansion: Philip Kearns, who claimed the new position of head of volatility trading, and Rishi Shah, who is RBS Greenwich's new vice president of derivatives swap options and trading group.

Derivatives is far from the only sector in which RBS Greenwich has been hiring. The firm nabbed Peter DiMartino, a 14-year veteran of Salomon Smith Barney, as its new head of ABS strategy and research. And just last month, RBS Greenwich hired Scott Auker and Kevin Blaney, both from JPMorgan. Auker and Blaney, who also have worked together at Banc of America Securities, will be charged with building MBS/ABS sales. These poachings follow a wave of hires in 2002, including former Credit Suisse First Boston commercial mortgage pro Mark Finerman, who was tapped to run its real estate finance department.

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