With the hiring of a new managing director to run its term securitization effort, and an affiliated issuance unit that has rival bankers jealous, HSBC Securities aims to become a full-service ABS shop for both its issuer and investor clients. HSBC will try to integrate its securitization operations into its more traditional strengths in unsecured debt and global investment banking.
"Securitization is becoming an increasingly global industry," noted managing director Jon Bottorff. "We aim to be an integrated, full-service shop for our corporate and institutional investor clients."
The recent addition of managing director Mike Normile (see ASR 1/5/04), a 20-year ABS banking veteran, gives HSBC instant clout among issuers and competing banks alike. With its existing conduit business, HSBC is in a significantly better position than new entrants to the ABS market have traditionally been.
Normile joins HSBC following a 10-year stint at Merrill Lynch, handling a variety of duties in the U.S. and European structured finance groups. Prior to his time with Merrill, he worked at Salomon Brothers (now Citigroup Global Markets) from 1985-1993.
His initial plan is to focus on assessing the strength of HSBC's global operations, its imperative needs and how to best integrate a securitization team.
The plan also calls on Normile to work with existing sales, trading and distribution pros in the U.S., Europe and Asia before looking externally for new hires to fill out the team. "The sales force has solid experience in senior unsecured products, and the banking group will work with sales and distribution in educating on the benefits of structured products," he added.
Once at full speed, HSBC will need to beef up certain aspects of its ABS operations, including ABS syndicate and research. Currently, the U.S. debt syndicate is headed by Jim Brucia in New York and HSBC's structured-finance research effort is headed by Markus Herrmann out of London. Bottorff and Normile expect HSBC to ultimately build an ABS research team in New York.
Since HSBC's purchase of Household in November 2002, ABS bankers have wondered how HSBC's securitization group would evolve and who, eventually, would be brought on to steer the ship. Having such a large consumer finance company (no. 2 in the U.S.) as a captive issuer is an advantage only a dominant ABS underwriter can rival.
"Notwithstanding the fact that we are affiliated with Household, we do not take this business for granted but rather will treat Household as though it was any prime issuer we would hope to do business with," said Normile.
Since Household divulged plans to increase its securitization efforts in January 2001, the firm has sold a combined 18 auto loan, credit card and home equity transactions, raising more than $19 billion through eight different lead managers. Household has also sold subprime mortgage collateral to Lehman Brothers, which in turn securitized them through its Structured Asset Securities Corp. principal finance vehicle.
Meanwhile, HSBC acted as lead manager on just one public term ABS in 2003, GMAC CARAT 2003-3, which it led jointly with Credit Suisse First Boston and JPMorgan.