Just over one year ago, Bank One’s global FX operations sat within the International Division of the group, which meant, importantly, according to Justin Foley, managing director and global head of FX options, that it missed out on the investment drive within the bank’s Capital Markets operation.
In early 2002, however, FX began reporting into Capital Markets, enabling it to take part in an expansion drive aimed at increasing Bank One’s presence in the markets and widening its client base.
“During the series of mergers and acquisitions that led to the creation of Bank One, the company did not invest in FX,” explains Foley, who was recruited from the same role at Bank of America recently. “So this new investment represents a change of direction for FX”.
A key stage of the investment process involved recruiting Foley to manage FX options. He will hire five or more options traders to strengthen the operation in the first quarter, he says. This reinforces a selective recruitment drive already underway within FX. Recent hires include James Schuler to run FX forward trading in Chicago; Ahira Asikawa to run FX sales in Tokyo; Carsten Poulsen to the corporate sales desk in London to cover Scandinavia; Clare Finch to the corporate sales desk in London to cover UK corporates; and Craig Schultz (corporate sales) who moved internally to the London office from the bank’s Australian operation “We also intend to strengthen our institutional coverage”, adds Andy Bowen, managing director, head of FX/interest rate derivative (IRD) sales, London.
In addition, Stewart Morton, managing director, head of FX/IRD trading in London, is looking to add a senior yen trader in London to strengthen his existing spot FX team. “Our model in London is changing to encompass interest rate derivatives and currency options in addition to vanilla FX and money markets,” he says.
Al Jirkovsky, head of global FX sales, who joined the bank in April 2002 from Bank of America, adds that building the options capability is a key part of Bank One’s overall FX growth strategy. “Along with our plan for options, we are also adding senior sales people in all our market segments, institutional, large corporate, and middle market. We will continue to add resources where we see client driven opportunities,” he says.
The growth in the bank’s global FX business is consistent with a general expansion of Bank One’s capital markets presence. According to Bill Wulkan, head of International Capital Markets, the bank is building its non-US presence in asset backed finance, credit trading and distribution, as well as interest rate derivatives.
John Anderson, global head of FX and fixed income derivatives trading, terms the expansion “a tailored build out according to client needs”, and acknowledges that as Bank One increases its market share, especially in the upper segment of the market, its trading profile will rise in conjunction. “We are looking to trade with clients in a larger business segment, who are demanding value-added services such as risk transference – therefore our trading profile will rise to meet client demand for excellent service and execution,” he says.
“If we succeed in building our market share, it will be because we have built a robust offering across a wider product set, using our strong balance sheet to establish our FX services within our clients’ business model,” he continues. “Our goal is to be a top quality FX provider globally and especially within the US, which is where our core customer base is. We have made many moves to help us achieve these goals and have established a global operation that trades under one name (Bank One N.A. Chicago). We have always had a solid base in the FX markets – we are now looking to leverage off that base with a series of selective investments.”
Perhaps the best card Bank One is holding is its strong balance sheet. The bank has managed to avoid the upheaval that has so impacted the banking industry, especially in the US.
The improvement can be tracked back to the appointment of Jamie Dimon as chief executive officer of the bank in early 2000. Typically, new CEOs tend to tighten the business up to a level at which they can implement change and begin the rebuilding process. The timing of Dimon’s appointment meant the group was cleaning up its balance sheet at a time when trouble was brewing.
“I think we are ahead of the curve in cleaning up our balance sheet, which is an advantage,” says Foley. “We now have to reinforce that advantage with a robust product suite to service clients and enhance our relationships. With Dimon’s work, the balance sheet is a real fortress of strength for Bank One and we are in an excellent position to grow revenues going forward.”
The strength of the balance sheet has meant that Bank One was in a position to buck the recent trend in the markets of reducing FX operations. “There is a changing demographic in the market,” explains Foley. “Many banks are looking at the resources they are expending on FX and questioning whether it is worth extending their commitment to the level necessary to compete. There is a choice of business models, banks either scale up or down. Bank One has already been through these decisions and is efficient and ready to grow.
“We studied this question closely and on the back of our strong balance sheet decided that we wanted to build and compete for an increasing amount of business, especially from the financial institutional sector,” he adds.