Securitization as
FLAGSHIP
16
investment banking
WHAT'S NewS Issue 4 April 1998
The global head of fixed income and derivatives is a passionate
investment banker. In a highly competitive environment, Michael Ice
thrives on the challenges generated by his specific areas of expertise.
Bringing that expertise to Rabobank International is one of the
biggest challenges - 'this is a very, very clean organization,' he says,
'but because we're just starting to add more and more businesses to
our existing base, we have a lot to do if we want to get this right.'
We carried a very brief report on your
business plan last December.That was after
RICO. What has happened since then?
RICO was the big picture, strategy, vision
and so on. What this finalized, approved
and funded business plan represents is the
ultimate layer of detail. That means exact
numbers on how many people will do
what, where they will do it, and ultimately
what the budgets are, how much revenue
we can expect to get from these people,
how much they will cost.
Right down to the nitty, gritty?
It is very detailed. That allows us to draw
conclusions that put our plans into
perspective. If you look at all the various
businesses that fall under my
responsibility, you'11 see many are
completely new to Rabobank. What
appears to be an agressive growth, is in
fact a well thought out, selective niche
approach to the capital markets arena.
Is that potential growth?
No, I'm talking real growth. This year,
1998, will be a year of tremendous growth
in my business. I'm actually budgeting a
loss, to lose money, because I have to hire
so many people to cover the expansion
and integration of these businesses.
Putting that into perspective, on the
interest rate side (I separate my business
into the interest rate and credit businesses)
I have global products and regional sales.
Now we have to put numbers on them.
The interest rate business is a fairly
mature business for the bank; Now there
are 68 people globally and a further 25
will be added.
Compared to the 76 people you're looking
for on the credit side, that seems quite a
small addition.
That's right, the credit trading
infrastructure is not as big. On the credit
side, we currently have 25 people. This is
a series of businesses, tax structuring,
private placements, secondary loan
trading - that is something this institution
has never done - we do syndication, but
that is primary loan distribution. We don't
do secondary trading where you buy loans
from others and sell them on. Euro bond
business is another activity that is in place.
You will have noticed we've already
moved these people to London. This
business has shrunk as we have
transitioned and will now be restaffed.
There will be an emerging markets group
in the credit trading side. We want to
build up securitization - that really should
become one of our flagship activities.
There will be credit trading and credit
derivatives. We will develop credit
research to support credit trading, wich is
still missing. For all these activities, we
currently have 25 people in place globally,
so you can see this is where we need to
add 76 people to business. That is why I
say we are a bit more mature on the
interest rate side although it needs some
rationalization and moderate expansion.
Who are you looking for and where will they
be located?
We'11 be doing a little bit of location
reorganization. What do you have? You
have a euro coming into place which will
eliminate a lot of currencies. There will be
a rationalization of the euro. That will
create net head counts, not add head
counts. But given the fact we've been very
focused on guilders and D-marks,
consolidation is really pretty easy. It is
really a matter of these people trading
euros rather than the currencies they trade
now. It is a matter of swap traders
becoming on-the-run traders and bond
traders becoming the off-the-run traders
of euro interest rates. People will see
dramatic changes in how they trade - they
will no longer be trading in a domestic
market with two other competitors. They
will be trading in a euro market with 100
other competitors. That's a challenging
Michael Ice, not creating an investment
bank, but expanding IB for the right reasons
and very different market environment.
We like to believe an opportunity for our
bank.
What about the US?
Some of this head count is expansion into
the US. The US book will take a
dramatically different approach. It will be
repositioned to be amongst the top dollar
swap books in the world. Our triple-A
will be a strategie advantage. We're pretty
much going into a three currency world -
dollars, euro, yen. The yen book will be
repositioned, we have a nascent yen book
sitting in Singapore. That will be
expanded substantially. On the back of
that, we will rebuild systems. We have to
put in what amounts to totally new front
end systems on the derivatives side. The
talent we recruit will be very much geared
towards the fact that we have to build
those systems.
Is that where you'11 be recruiting on the
interest rate side?
Putting the right systems in place is a
massive task. In the world of interest rate
derivatives you have two huge projects -
euro implementation and systems. So on a
head count basis, it doesn't look like
there's that much going on. But we're
dealing with very, very important projects
here.
These would have been necessary whether
we built IB business or not.
That's right, these would have affected
business we already had in place. When
you jump to the credit business, this is
where investment banking is really
expanding in RI. And this is where it is
supposed to be expanding. I.et's just go
back and understand intellectually why RI
is expanding its investment banking
activity. I say expanding and not creating
