DisruptingBanking ABTEC 2015 Final
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Transcript of DisruptingBanking ABTEC 2015 Final
#DisruptingBanking
by Ziad AwadHow Technology, Regulation and Market Forces are
Disrupting Banking and creating new winners in Financial Services
About the speaker: Ziad Awad CEO of Awad Capital Ltd., a Dubai based, DFSA regulated
financial services firm specialising in M&A, Corporate Finance and the Capital Markets. Founded in 2013.
Previously worked with Goldman Sachs, Merrill Lynch and Bank of America for 18 years in Paris, London and Dubai
Started career in 1993 as a Fixed Income trader with Goldman Sachs and participated in the Electronic Commerce revolution that took place in Europe in the early 2000’s
Was Board Member and Executive Director of MTS Associated Markets, an Electronic Trading platform, between 2004 and 2006
What is disrupting banking?
Regulators Technology Market Forces Customers Expectations
What do customers Want ?
“Good Service” Attentive Fast Understanding
Cost efficient service Why pay a bank for a transfer if it can be done by
email? Access to products and services
Many potential customers are being excluded by the system
What is Banking ?The Banking Pyramid
Advising
Investing
Trading
AdvisingProprietary
Investing in companies
Trading financial instruments
Underwriting Stock and Bonds Issuance by
corporates
Lending to riskier corporates including SMEs
Lending to Prime Households, Governments and Corporates
Deposit Taking
Underwriting
HY Lending
HG Lending
Deposits
What is Banking ?How it used to be done – One Stop Shop
Investment Banking DivisionPrincipal
Investments, Private Equity ,
AMGlobal Markets
Division
Capital Markets Division
Commercial Banking Division
Corporate Banking Division
Retail Division
AdvisingProprietary
Investing in companies
Trading financial instruments
Underwriting Stock and Bonds Issuance by
corporates
Lending to riskier corporates including SMEs
Lending to Prime Households, Governments and Corporates
Deposit Taking
What is Banking ?The trouble with the One Stop Shop
IB DivisionPrincipal
Investments
Global Markets Division
Capital Markets Division
Commercial Banking Division
Corporate Banking Division
Retail Division
Conflicts
Access to capital
Pricing
Pricing and Quality of Service
What is Banking ?The Alternatives to the One Stop Shop
Investment Banking Division
Principal Investments, Private Equity and Asset Management
DivisionsGlobal Markets Division
Capital Markets Division
Corporate Banking Division
Corporate Banking Division
Retail Division
Boutique Investment BanksPrivate Equity Funds,
Independent AssetManagers, including Hedge
FundsHedge Funds
Independent Advice + Direct Placement
Non-Bank Lending – SMEs and High Yield
Non-Bank Lending - High Grade
Online Deposit, Transfer and Lending
Who will be the winners and losers?The One Stop Shop model is the big loser
Regulatory pressure to separate and spin-off non-banking activities Governments do not want another bailout
Cost of Capital makes lending and trading very expensive
Significant reduction in risk appetite Political pressure on compensation
structures accelerates the brain drain
The Winners are seeing rapid growthFintech is revolutionising retail banking
Picture credit: TransferWise Blog
“Banking will always be needed but banks as we know them could easily disappear” – Bill Gates 2,000 bank branches closed
in the UK over the last decade
A multitude of digital money transfer platforms are emerging, effectively cutting the cost of transfers close to zero Square Cash, Venmo, Paypal,
TransferWise …
The Winners are seeing rapid growthNon-Bank Lending is exploding
Non-Bank lending in the US is just above 50% of total lending In Europe the proportion is still closer to 25%
Technology is a huge enabler of non-bank lending Allows lower cost and more efficient connection of
lenders and borrowers A variety of winners will emerge, including
credit funds, peer-to-peer lending, social lending etc.
Picture credit: Graham Rowan Blog
A variety of winners will emerge, including credit funds, peer-to-peer lending, social lending etc.
Beyond their success at managing money and generating returns, Hedge Funds are also increasingly taking the role of liquidity providers as Banks’ risk appetite reduces
The Winners are seeing rapid growthHedge Funds are becoming mainstream
'90 '95 '00 '05 '10 '14-0.250.250.751.251.752.252.75
Estimated ass...
Hedge-fund assets have grown sharply since the early 1990s Values in $ trillion
Source: Hedge Fund Research
The Winners are seeing rapid growthPrivate Equity AUMs at a record highs
Dec-
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0
500
1,000
1,500
2,000
2,500
3,000
418 374 360 465 554 675 898
1,265 1,204 1,413
1,783 2,029
2,332 2,546 2,644
All Private Equity: Unrealized Value, 2000 - 2014
Source: Preqin Performance Analyst
Unre
alize
d Va
lue
($bn
)
9 out of the top 20 advisers on M&A in the US in 2014 were independents, versus 5 in Europe
The Winners are seeing rapid growthThe big come-back of the M&A boutiques
United States Announced Deals (Any Involvement)
2014(1/1/14 - 12/31/14 )
Firm Rank MKTShare
VolumeUSD (bn)
Goldman Sachs & Co 1 33.8% 655.0 Bank of America Merrill Lynch 2 25.7% 496.8 JP Morgan Chase & Co 3 25.1% 486.2 Citigroup Inc 4 22.9% 444.8 Barclays PLC 5 22.2% 429.2 Morgan Stanley 6 22.1% 427.9 Lazard Ltd. 7 15.8% 305.1 Deutsche Bank AG 8 11.6% 224.6 Centerview Partners LLC 9 11.5% 222.2 Credit Suisse Group AG 10 11.3% 218.6 Evercore Partners Inc 11 5.5% 106.5 UBS AG 12 5.1% 99.6 Jefferies LLC 13 5.1% 99.5 Allen & Co Inc 14 4.6% 89.0 RBC Capital Markets 15 4.1% 79.7 Wells Fargo & Co 16 4.0% 77.5 Perella Weinberg Partners LP 17 4.0% 76.9 PJT Capital LP 18 3.9% 75.7 Rothschild Ltd 19 2.8% 54.1 Greenhill & Co Inc 20 2.3% 43.6
Total $1,937.0
Europe Announced Deals (Target or Seller)
2014(1/1/14 - 12/31/14 )
Firm Rank MKTShare
VolumeUSD (bn)
Morgan Stanley 1 29.7% 268.4 Goldman Sachs & Co 2 29.3% 265.2 Lazard Ltd. 3 23.9% 216.3 Deutsche Bank AG 4 23.2% 210.4 Bank of America Merrill Lynch 5 19.1% 172.6 JP Morgan Chase & Co 6 18.4% 166.9 Rothschild Ltd 7 16.6% 150.3 Credit Suisse Group AG 8 15.8% 143.1 Citigroup Inc 9 15.6% 141.5 Barclays PLC 10 15.3% 138.3 BNP Paribas SA 11 13.1% 118.6 UBS AG 12 9.0% 81.2 Societe Generale SA 13 8.5% 76.7 HSBC Bank PLC 14 7.6% 68.7 Credit Agricole Corporate & IB SA 15 6.3% 56.6 Centerview Partners LLC 16 5.6% 50.9 Perella Weinberg Partners LP 17 4.3% 39.1 Zaoui & Co LLP 18 4.1% 37.5 Ernst & Young 19 3.2% 29.0 Banco Santander SA 20 2.3% 20.3
Total $905.3 Includes Mergers, Acquisitions, Divestitures, Self-tenders and spinoffs. Excludes Open Market Transactions; Total Volume represents all announced transactions in US$ billions
%