Gulliver's travels

In November, Stuart Gulliver will take on the newly create role of head of Global Markets at HSBC and relocate to London in February. His new expanded role will make him the effective second-in-command to HSBC's global investment banking boss, Stephen Green. Tony Rademeyer will take on the mantle of head of corporate, investment banking and markets in Asia. We spoke to Gulliver about the changes.

What's the thinking behind the creation of your new job?

Gulliver: I set up the Asian markets business in 1994. Back then it had 28 people in Hong Kong and now it's over 1000 and is in 19 countries. We've managed more than 20% compound annual growth in net revenue since 1994.

We've delivered strong net revenue growth against a backdrop of very different circumstances - which demonstrates the robustness of the business model. The debt side came from nothing in 1994 to becoming strong in local currencies and dollars. In foreign exchange, we and Citibank have tiered away from everybody else.

So I would imagine the success of the Asian business may have been one of the reasons the group has decided to expand my responsibility from running markets in Asia-Pacific to markets globally.

The hope is that we can replicate some of the success we've had in Asia in Europe and America. That's about a stronger derivatives business, and euro currency league table position. Given our size and scale in the UK and France, we should be top five for all issuers in euro currency bonds. I see no reason why we can't get a top three position in FX in Europe. All of this is perfectly achievable.

The American business is the serious challenge as foreign houses do struggle to make headway there. But it's such an important financial market that you can't ignore it.

Previously we've run the business as three different regions, and now we will have a common vision and set of goals and will scale it up. That's what I will now put in place.

It's a great job, although it's a shame I'll have to go to the UK to do it. I will miss Hong Kong greatly. But London is the logical place from which to run global markets and is in the best time zone to run a global business.

In 1994 when you were given the Asian markets business to run, how many years did it take for it to take off?

The inflexion point was the second half of 1996, so it was about two years.

And will it take that long to replicate the same success in Europe?

It's a two-year to two-and-a-half-year process. These things take time.

Paradoxically, you are a very important personality in the Asian business. Will the Asian business lose momentum when you go to London?

It is part of my job, as global head, to make sure that doesn't happen. Asia is critical to HSBC and the markets business is the one that I've personally built and thus have a proprietary interest in. Part of the challenge about this global role is to make sure what you are suggesting doesn't happen.

I will be coming to Asia once every six weeks and I will continue to visit clients here.

When Mark Bucknall [former head of debt capital markets] went to the US, you had previously said you would take on the 'big game hunter' role of winning key debt mandates. Who will do that now?

That will be a combination of people. Tony Rademeyer (left) will be the local guy on the ground. I will fly back selectively. And then people like Avi Bindra, Stephen Williams, Helen Wong and Paul Tay are all reasonably big faces in the marketplace and so I am confident of continuity. And, of course, Mike Powell is still here as well.

I know it seems a weaker argument every time another taxi leaves the rank, but we do have phenomenal bench strength here. Over nine years we've built a broad partnership of 11 or 12 people with me as primus inter pares and the advantage of that structure is you can peel one or two off and still have tremendous depth.

You mentioned before that the bond business was built from scratch. What was the breakthrough bond mandate for HSBC?

The key transaction was an FRN we did for Citic Pacific in 1995. It was the classic case of not being able to get a deal without a credentials pack, and Citic made that possible for us by being our first deal.

Likewise doing deals for the IFC and World Bank in local currencies were important breakthroughs, too.

Looking back, what was the real milestone in terms of building the Asian markets business to its position of impressive profitability today?

The Asian crisis was key. It changed the market from being one where you could pile in from anywhere in the world, apply the same technology and it would all be the same. Before the Asian crisis, every credit was crowded on top of the other in terms of spread and so there was no advantage in having local knowledge. That put us at a disadvantage.

The Asian crisis then put an enormous premium on being able to recognize that Indonesia is different from Thailand, which is different from Korea and so forth.

The second thing the Asian crisis created was a demand for the creation of local currency bond markets. That also played to our strength, because competing in dollars we have no obvious advantage but local currency is a different matter. We are in-country around the region and have local currency funding bases. The crisis also put up a barrier to entry for houses that didn't have those advantages.

Thus putting two guys on a plane in New York and dropping them into Asia no longer worked. That strategy did work in 1994.

So I would say the Asian crisis was the defining moment. It stretched out our competitive advantage and narrowed the field.

On a more personal level, what will you miss most about Asia?

Everything.