HSBC admits defeat | USAEMALL.com

One scoop to start: Santander’s UK chair William Vereker has resigned, exposing a rift with the bank’s Spanish parent and its executive chair Ana Botín, according to people familiar with the matter.

And another one: SoftBank is in talks to lead a funding round for artificial intelligence robotics start-up Skild AI that would more than double its valuation to close to $4bn, as Masayoshi Son hunts for deals to match his vaunted ambitions for the sector.

In today’s newsletter: 

• HSBC sunsets investment bank units

• US insurer Brighthouse considers a sale

• Golden Goose’s next chapter

HSBC cuts its investment banking ambitions

HSBC has never had the kind of investment bank that made the titans of Wall Street quake in their boots.

The London-listed lender is not even in the top-10 banks by global investment banking revenue, according to Dealogic data. Its main strengths lie elsewhere, in retail and commercial banking.

Still, it has a credible equity capital markets business in the UK and Europe, and can advise globally on deals. But no more, after the latest stage of new chief executive Georges Elhedery’s wide-ranging overhaul of the bank.

HSBC said on Tuesday that it would shut its ECM and M&A advisory businesses in the UK, Europe and the Americas. However it’s still keeping some presence in those markets, with debt capital markets, leveraged finance, real asset finance and infrastructure finance businesses.

And in Asia and the Middle East, it isn’t shutting the investment banking units down.

The units being closed “really don’t have scale”, said a person with knowledge of the decision. “It was just a very tough job to build up to a level where [HSBC] has a competitive edge.” 

Continuing to try to “break in” to those markets would not be the best use of HSBC’s resources, they said.

The first clue something might be afoot was when there was no sign of an initial agreement on the size of the bonus pool for investment bankers in mid-January, two people with knowledge of the matter said. 

Still, some felt blindsided by the announcement. “A lot of people are in shock,” one UK-based HSBC banker said. 

The move is also raising questions about what’s next. 

Will Asia-based M&A bankers leave in frustration at not being able to work on the kind of deals that need a global footprint? What is the future for HSBC’s equity research and sales and trading businesses? 

It’s the latest big play from Elhedery, who has already announced an overhaul that merges the commercial bank with the global banking and markets unit — which includes the investment bank — and which splits the bank into an “eastern markets” and “western markets” section. 

It’s also a reminder, if one were needed, that investment banking is just not that big a deal for HSBC. Globally, it accounted for just 6 per cent of its total revenues in the first half of last year.

Private capital’s next insurance mega-deal

A new era on Wall Street is unfolding, and it puts asset managers and non-traditional banks at the centre of financing markets.

Insurance money is fuelling the growth of industry heavyweights such as Apollo, Blackstone, Brookfield and KKR. So much so that these firms have fought each other to buy insurance operations, often bidding against each other in a land grab for assets.

In recent years, public markets have almost been cleaned out of annuities sellers by private capital buyers. But some large deals remain for buyers with the stomach to turn around underperformers.

On Tuesday, DD’s Sujeet Indap and Antoine Gara reported that Brighthouse Financial, an insurer with more than $200bn in assets, has hired Goldman Sachs and Wells Fargo to consider a sale.

Brighthouse, spun off from MetLife in 2017, is a turnaround story that will require a heavy facelift from any buyer.

The company, which has a market value of $3bn, trades at just 0.8 times book value per share as it has struggled to increase profits needed to reach its targeted capital ratios. 

However, Brighthouse’s $120bn investment portfolio makes it one of the few life insurers with sufficient scale to appeal to alternative asset managers with big private credit strategies.

Such capital has fuelled its push into mainstream lending markets such as investment grade credit.

The Brighthouse sale process comes as other large life insurance platforms, including American Equity Investment Life, American National, Global Atlantic and Talcott Resolution have merged into alternative asset managers. 

Asset managers are also pursuing a deal for Viridium Group, a German life insurance group backed by Cinven. 

Some industry participants noted that the new annuities that Brighthouse had been briskly selling presented an attractive opportunity if the challenges of legacy blocks could be acquired cheaply enough.

But Brighthouse shares shot up as much as 20 per cent on Tuesday, removing much of its discounted valuation. 

Permira’s golden boot 

The Italian luxury sports shoe brand Golden Goose has laid a golden egg for its private equity owners.

Last June, the investment group Permira killed plans to list the company on the public markets in Milan at the last minute, shocking advisers and investors after more than 10 months of preparation. 

Amid turbulent markets, Golden Goose — which produces distressed-look trainers — was set to be valued at less than €2bn before the deal was pulled. 

Yet this week, Golden Goose showed there is rising investor demand for the company. The private equity owners of the shoe brand sold a 12 per cent stake to Hong Kong-based Blue Pool Capital, an investment group backed by Alibaba co-founder Joe Tsai.

While financial terms weren’t disclosed, DD’s Ivan Levingston, Alexandra Heal and Kaye Wiggins revealed that Golden Goose was valued at more than €2.2bn in the deal, according to sources.

That transaction will allow Permira to cash out some of its investment five years after paying just under €1.3bn to buy the business from Carlyle, which had bought it at a €400mn valuation in 2017 and retained a minority stake.  

While the company could yet pursue a public listing, such minority stake sales are an increasing feature of the private equity landscape to help owners monetise their investments with the M&A and IPO markets still somewhat tricky to navigate.

And the deal also proves Permira heeded the wisdom of the old fable: better to wait patiently rather than risk killing the goose.

Job moves 

• Peter Mandelson is set to be confirmed as Britain’s ambassador to Washington, the FT reports. The US has approved in principle the Labour peer’s appointment, a condition of him taking up the post.

• Sony has chosen long-serving finance head Hiroki Totoki as its next chief executive.

• KKR has tapped Guy Metcalfe as a senior adviser. He was previously global chair at Morgan Stanley, where he worked as managing director and led its real estate investment banking business.

• Oaktree Capital Management has promoted Jennifer Marques to head of strategy and structuring for asset-backed finance. The firm has also hired Rana Mitra as a managing director after 15 years at Atalaya Capital Management.

Smart reads 

Last men standing Nate Anderson recently announced he’s leaving the short selling game and winding down Hindenburg Research, the FT writes. Who’s left? 

Serious spook While Nvidia investors are spooked by the Chinese AI upstart DeepSeek, short sellers are making a killing, the FT writes.  

Pressure’s on Activist investors are circling US Steel as the takeover deal with Nippon Steel hangs in purgatory — and they’re holding chief executive David Burritt’s feet to the smelter, Lex writes.

News round-up

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Hedge fund manager Steve Cohen still ‘bullish’ on AI after big sell-off (FT)

Diageo sells Guinness Ghana after denying whole brand for sale (FT)

France deepens probe into Binance over alleged money laundering (FT)

Elon Musk clashed with Nicolai Tangen over Norway oil fund’s vote against Tesla pay (FT)

JPMorgan in talks to lease Credit Suisse’s Canary Wharf building (FT)

US nuclear fusion start-up backed by Sam Altman and Peter Thiel secures $425mn (FT)