Private Equity's Latest Recruit Looks Past U.S. Banks
Lepro, Sara, American Banker
Byline: Sara Lepro
For Hans Morris, now's a prime time for private-equity investment in financial services - though not necessarily in banks, or in the U.S.
Morris, who joined General Atlantic LLC as a special adviser on financial services investments Tuesday, is one of several longtime industry executives whom private-equity firms have recruited lately.
But unlike many of those veterans, he isn't particularly interested in scooping up failed banks with the help of the Federal Deposit Insurance Corp.
"You can buy capital in a bank, or you can invest capital in a payments company ... in a stock exchange, market maker, broker-dealer, insurance companies," he said. "None of those are affected by FDIC's regulation."
Morris, 51, was most recently the president of Visa Inc. from 2007 to last year, a period when it restructured and went public.
He made his name during a 27-year career as an investment banker at Citigroup Inc. and its predecessors. He spent much of that time brokering sales of financial institutions and assets like credit card portfolios.
General Atlantic's focus on emerging markets attracted him to the firm, he said.
"When you go to these other countries, you realize that there's just much more growth and latent demand" for financial services. "The United States is going to grow more slowly." Specifically, Morris said he has his eye on China, Brazil and Europe.
None of this is to say that Morris will be spending all of his time overseas, or with nonbanks. He acknowledged the part that the U.S. banking crisis has played in private equity's interest in the sector.
"Capital is needed in the industry," he said. "You had a tremendous convulsion of balance sheets, regulatory regime changes, failures, recapitalizations and mergers."
But instead of scouting for failures, "one very good opportunity is working with management teams at banks that are refining their existing portfolio of assets, so they need to divest or change their businesses," he said.
A deal that General Atlantic made before his arrival, to buy First Republic Bank from Bank of America Corp. for more than $1 billion, clearly fits that description.
The $2.3 trillion-asset company early on saw overlap between First Republic, a former Merrill Lynch & Co. unit, and U.S. Trust, a private bank B of A bought in 2006.
Ken Lewis, Bank of America's former chief executive, said during a May conference call that First Republic was an example of "pure duplication" in confirming plans to sell the bank.
"We don't need it because we already have a world-class private bank," Lewis said.
B of A announced the deal to sell the private bank five months later. …