The departure of four key executives could badly damage Salomon Brothers' vaunted financial institutions advisory practice, Wall Street observers say.
Richard Barrett, a top Salomon executive; Gerard Smith, co-head of the firm's financial institutions group; Brenda White, head of the mortgage banking group; and Alan Ginsberg, a vice president covering commercial banks, are among a score of top executives at Salomon Brothers Inc. to have quit recently.
They were hired last week, at multimillion-dollar annual salaries, by UBS Securities Inc., a unit of Union Bank of Switzerland.
Almost instantly, the move creates a financial institutions force at UBS, while it raises grave doubt whether Salomon can retain its preeminence.
"It certainly throws a wrench into some senior relationships they have," said one well-placed source.
Mr. Barrett was the lead adviser to Fleet Financial Group in its recent acquisition of Shawmut National Corp., and he is close to a number of banking giants like BankAmerica Corp. and Banc One Corp.
Salomon, always a leading mortgage banking specialist, was the top bank adviser in 1993 and was ranked fifth in 1994, according to SNL Securities.
The Salomon group's director, James MacNaughten, dismissed claims that it would no longer be a major presence in the field.
"Notwithstanding the fact that the people who have left are competent professionals, and have been friends of mine, the principal core of Salomon's relationships with a broad group of financial institutions we do business with persists," he said.
"I am not aware of any companies saying that, because these people left, they will not continue to look at us as their principal investment bankers anymore," he added. "In the end we have strong institutional, as well as personal, relationships."
David Levy and Robert Smith, who Mr. MacNaughten said completed most of the firm's bank mergers and acquisitions during the last couple of years, will remain as the core of the group, which has 55 members, not including internal financial analysts.
Wall Street opinion, however, did not support Mr. MacNaughten's contention that the defections would cause little damage.
"They have clearly lost some very key people in the financial institutions area, and it will be difficult to replace them quickly," said a Wall Street investment banker, who requested anonymity. "It will clearly slow whatever momentum that they have had."
Under pressure from its key shareholder, Warren Buffett, Salomon imposed a new compensation system in October designed to limit pay levels that were among Wall Street's grandest.
The move sparked an exodus in many key areas, like trading and investment banking.
"A lot of an investment bank's value is the talent it employs," said Guy Moszkowski, an analyst at Sanford C. Bernstein & Co. "So it has got to be worrisome to any investment bank to see the exodus of this kind of talent in this short a period of time."
Joining the four chief defectors at UBS is Robert Nau, Salomon's former head of global equity research.
For its part, UBS has catapulted itself into a strong position to get financial institutions advisory work.
Last September, UBS' director of corporate finance, Kim Fennebresque, told American Banker he was not interested in advising banks because of conflicts that could arise from one bank's advising another.
But the opportunities the Salomon executives presented could not be passed up, he said.
"There has been an acceleration in the past six months of the blurring of the differences between banks and investment banks," he said, "and it is likely the obfuscation of the line of demarcation between the two will only quicken."
