In another sign that commercial banks may have as much difficulty holding onto talent as investment banks, several key members have left PNC Bank Corp.'s corporate finance group to join Pittsburgh-based investment bank Parker/Hunter Inc.
Led by Craig A. Wolfanger, the former PNC senior managing director of corporate finance, the group was said to be responsible primarily for private placements and mergers and acquisitions advisory work at PNC.
Mr. Wolfanger, a former director at Alex. Brown & Sons and Kidder, Peabody & Co., joined PNC in 1991 to help develop the company's investment banking products.
As such, the departure of as many as six PNC investment bankers could have implications for other aspects of the business. PNC would not confirm the number of departures.
Although not a huge player in the private placements business, PNC had landed some attractive deals, including a recent $50 million deal for Steel Technologies.
A spokesperson for the bank said the losses would "not change the strategic direction in corporate banking," adding that "there's sufficient depth of management staff that the responsibilities will be assumed by others." Mr. Wolfanger did not return several phone calls for comment.
But several industry experts said they believed the corporate flight at PNC holds some implications for the bank.
"Every bank's investment operation has some person doing private placements," said Nancy A. Bush, regional bank stock analyst at Brown Brothers, Harriman & Co. "To the degree that PNC particularly is one of the companies that says asset management and investment services are a major focus, they do need that (i.e. the private placement) ability."
Indeed, bankers and others generally recognize that offering private placements remains an important item, if not always a very profitable one, on the investment banking menu.
"There are lots of banks who feel that they need to do private placements whether they make money or not," said Spencer Gagnet, a vice president with Hibernia Bank.
Banks need to provide private placement to be considered full-service financial institutions, he said.
"Private placements are vital and growing," said John PC Duncan, a Chicago partner in the law firm of Jones, Day, Reavis & Pogue. "The 144A and traditional private placement markets are growing by leaps and bounds. There is an opportunity to place large amounts of money."
To be sure, most think any losses from declining private placements business would be minimal to the bottom line at PNC.
"Their contribution to the bottom line is so small as to be almost insignificant," said Ms. Bush. Another analyst said the departures probably represented more of a stubbed toe than a broken leg for the bank.
Additionally, PNC has other priorities of greater significance than private placements.
"PNC is luring in risk managers, to strengthen their asset liability management," said Emanuel Monogenis, who heads the bank hiring at Heidrick & Struggles, a New York executive search firm. "That's an enormously greater priority than private placements."
Still, seizing opportunities in private placements could be important for the future, particularly in view of potential changes in the Glass- Steagall Act, the federal law that has separated most aspects of commercial and investment banking since the 1930s.
"If you believe that Glass-Steagall will fall and banks will offer a more complete range of investment products, and a more complete range of investment services, private placements will always be a part of that," said Ms. Bush.
Developing private placements as a line of business has been difficult for banks, however, especially with groups of talented people in the field jumping from firm to firm.
Hibernia has solved this problem by doing its private placements with a joint-venture partner. Hibernia originates private placements, and its boutique investment banking firm, SPP Hambro, brings them to market.
"It's not unusual for groups of investment personnel, particularly in banks, who are all engaged in the same function to leave en masse and go somewhere else," said Ms. Bush.
"What happens is that people try to staff these groups with Wall Street talent," said a private placement specialist. Once the talent arrives, they fight to get the business on margin, executing low-cost deals.
At the end of the year, said the private placement expert, the group feels like it should be compensated, while the bank looks at a less-than- stellar net income.
Mr. Duncan said the difficulty in holding onto talent is illustrative of the broader problems in meshing traditional commercial and investment banking skills and compensation packages.
Both building businesses internally and acquiring outside organizations have caused problems for banks, said Mr. Duncan. And the problems of keeping investment banking talent is one banks have not been able to solve.
"The challenge is to redefine investment banking in such a way that investment bankers provide the brains and the services needed by corporate finance, but build long-term relationships," said Mr. Duncan.