July 12, 2019 / 11:04 AM / 2 months ago

Senior jobs in loan market under threat

LONDON, July 12 (LPC) - The recruitment of senior syndicated loan bankers is under threat as a low deal environment in conjunction with increased automation and regulation are making these roles progressively obsolete.

Syndicated loan volume across Europe, the Middle East and Africa hit a 15-year low in the first half of 2019, according to data from LPC, with volume 37% lower in the first half of 2019 than the US$586bn reached a year earlier.

The knock-on effect has been a decrease in recruitment in syndicated loan teams, especially for senior positions such as loan syndication directors or managing directors.

“It is becoming increasingly difficult to find decent roles in this market,” said one recruitment consultant.

The contraction in the number of deals only tells part of the story. Bankers say the downturn is simply a catalyst for a more systemic shift in the loan market in which the need for personal relations, contacts and experience is being eroded by increased automation and by regulation, which is curbing transparency and the flow of market intelligence in the industry.

“It’s a toxic cocktail of low volume, regulation, automation and lack of transparency,” said one banker. “Banks don’t want managing directors and directors. They used to hire 45-55 year-olds and now the trend is to hire 25-35 year-olds. Syndication used to be an art but they don’t need the same skill set anymore, instead banks fight to pay as low a salary as possible.”

The rise of club deals versus syndicated loans, especially in European investment-grade transactions, has struck a blow for the necessity of knowledge and experience brought to the table by senior bankers.

“The knowhow and experience you can claim as an originator or structurer is less sought after. The placement to lenders who are not relationship banks that are trying to become relationship banks, or to one off opportunistic lenders, is less important,” a second banker said.

“The only transactions left that need placement and personal contact is Schuldschein deals. Even with structured and leverage deals it is less and less needed in Europe.”

EMERGING CHANGE

Last month Dutch bank ING cut more than 35 people in its loan syndication, corporate finance, debt capital markets and money markets businesses.

Those affected included Nick Vozianov, a director in the syndicated loans team and his boss Oliver Blount, a managing director, who were focused on the emerging markets.

Like the overall EMEA region, Central & Eastern Europe — one of ING’s main focuses — has faced its own massive downturn over the last number of years. Borrowers in the region raised US$18.25bn of deals in the first half of 2019, down 53.2% from the same period last year, its lowest volume in ten years.

“What happened at ING is not surprising in the sense that CEE business volumes and deal numbers are declining year-on-year,” the second banker said.

Russia – once the sweet spot for CEE syndicated lending – produced zero closed deals in the first quarter and the majority of deals which do complete tend to small club deals rather than large syndications.

Those deals that do make it to the market are often self-arranged by the borrower.

“Nowadays true bookrunning is hardly happening anymore. Deals are being self-arranged - you just don’t need the same skill set as before,” the second banker said.

EXPERIENCE ON THE SLIDE

This feeds into the overall declining appetite within the industry for the experience, market intelligence and contacts provided by more experienced loan syndicators.

Increased regulation means banks can no longer speak to each other, and lender and borrower can no longer discuss other deals in the market.

“Treasurers still want to know why you price a deal or structure it in a certain way, but you are not allowed to say it. We cannot share external market information about similar deals in the market to theirs and you can’t explain the rationale behind your decisions,” the second banker said.

“It’s just a case of this is our offer take it or leave it — market intelligence doesn’t exist anymore.”

The erosion of market intelligence from deal negotiations has facilitated the growth of automation within the industry, with web based systems for managing loan syndications such as Debt Domain growing in number and usage.

However, at the same time, bankers say the recent growth in the number of online banking systems has helped to simultaneously slow down the move to automation in the industry.

“There are too many platforms and they are not standardised. There are different banks on different platforms for the same deal and that all has to be manually coordinated. Saying a platform can provide 100% automation is bullshit. Borrowers are getting sick of it,” the second banker said.

“Automation can’t really happen unless there is standardisation.” (Editing by Christopher Mangham)

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