The investment bankers pitching for the initial public offering for cinema business Hoyts got the call back yesterday - and the winners were Goldman Sachs JBWere, UBS and, out of left field, Commonwealth Bank's new institutional broking business.
This business, an extension of retail broker CommSec, is starting to make a mark on the corporate scene, having picked up a piece of the Amcor placement and entitlement offer, and roles in the Myer and Kathmandu IPOs.
It has also picked up some smaller equity raisings.
But in the Hoyts deal it was not just one of several used to ensure coverage of the entire market. This time it edged out established investment banks with a track record in these deals.
And the secret to its success is fascinating. CBA is using its muscle.
The bank has a long record in corporate lending and fixed-interest and foreign exchange. And, while in retail CommSec has a large market share, the introduction of an institutional business to compete in the big league with the likes of Macquarie, Goldman Sachs and UBS could ultimately threaten the status quo.
The secret to its success is its push to tie corporate lending to equity deals.
While there is plenty of competition among investment banks to raise equity for corporates there are now fewer players in the corporate debt market.
The offshore lenders are far more seriously constrained than they were before the GFC and, if CBA is providing the debt, it has plenty of leverage to demand that its borrowers avail themselves of the services of the bank's corporate equity division. Already plenty of business customers and institutions use CBA's fixed-interest services; so asking them to clip the ticket again is not such a big ask.
The idea is to offer several products. Banks have been aspiring to achieve this for years with their retail customers. They have attempted to cross-sell them into new banking products, superannuation and insurance. And for the most part it has been an abject failure. But they had little leverage with retail customers. Not so when it comes to these corporate customers.
CBA has plenty of distribution capability at the retail level and needs only to bolster its sales and research team to get true traction with institutional clients.
It has made some inroads in this department and, if the deal flow continues, it will attract fresh talent.
Its sounds like an ideal recipe. But for those with long memories the realities of the marriage of full service broking houses with retail banks has been no fairytale. During the 1980s banks embarked on a broker buying binge in which all but CBA bought out large broking partnerships - all of which ended in divorce primarily because of cultural clashes: the brokers had a risk appetite and the bankers had an aversion to risk.
It will be interesting to see whether the CBA experiment of growing its own institutional broking business will yield a different result. Certainly the world has changed since the 1980s and a more integrated model might have a better chance of success. And if it does there is no reason that the other three major trading banks would not have a stab at replicating a CBA success.
But the new business model does not see the broking business as a separate pillar. Ultimately, everyone at CBA reports to chief executive Ralph Norris. And he in turn must understand that to compete with the existing investment banks he will need to bid up salaries.
There is plenty of talk among those in the industry about CBA's new broking business bidding up salaries in the market for high-level dealers and analysts. Certainly this new business poses a threat to the established players. Sure, they have the runs on the board and established broking/investment banking relationships. But when businesses need finance and credit is tight, it is easy to see how big lenders like CBA can extract some more business out of equities.
