Magazine article American Banker

First Union Adding Equity to Section 20 Menu

Magazine article American Banker

First Union Adding Equity to Section 20 Menu

Article excerpt

First Union Corp. plans to enter the equity underwriting business this year, filling out the menu of capital markets products it can offer customers through its section 20 subsidiary.

The subsidiary, First Union Capital Markets Inc., will hire up to 60 equities traders, salespeople, and analysts over the next 18 months but has yet to select a leader for the new operation, said Louis A. "Jerry" Schmitt, a managing director and co-head of the subsidiary.

"It is not a decision to take lightly. We made the decision that, given all that we have going on with our customers in terms of their needs and our trying to be their capital markets provider, it's the right thing for us to do," said Mr. Schmitt.

The subsidiary received Tier 2 powers - authority to underwrite both corporate debt and equity issues - from the Federal Reserve Board in June 1995. It began underwriting corporate debt at that time, but "equity required further infrastructure review by the Fed," said Mr. Schmitt. The unit obtained basic securities underwriting, or Tier 1, powers in 1989.

"We wanted to exercise the debt powers and get that rolling and feel comfortable," before entering the highly competitive field of equity underwriting, said Mr. Schmitt.

First Union underwrote 33 public debt deals last year, with proceeds of $4.3 billion.

By building an equities business, First Union will compete with both securities firms and more than half of the 40 commercial banks with securities subsidiaries authorized to underwrite corporate stocks.

"It's a natural extension of what they have been doing," said Carole Berger, a bank analyst with Salomon Brothers Inc. "It's a recognition that midsize businesses are going to tap the capital markets. If you want to continue to bank that customer, you're going to have to provide not just traditional loans but capital markets products too. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.