Adding another team of specialists to its rapidly growing U.S. investment banking unit, Canadian Imperial Bank of Commerce has hired an 18-member U.S. government securities team from S.G Warburg.
The team, headed by Robert Giordano, will be based in New York and will help expand the U.S. government securities business, including repo financing, trading in securities, futures, and options at Wood Gundy Corp., Canadian Imperial's U.S. investment dealer subsidiary.
John Hunkin, president of CIBC Wood Gundy, said the move was in line with a "global strategy of augmenting our product base, generating significant client benefits and expanding our presence in the United States."
The team is the latest in a series of hires by Canadian Imperial, which has been building staff since it decided over a year ago to expand into capital markets operations.
Wood Gundy employs around 4,000 people worldwide and more than 800 in the United States.
Over the last year, the bank has added several hundred support staff specialists in New York, including a capital markets team from Lehman Brothers Inc., 50 high-yield debt specialists from the Argosy Group, and traders from Chase Manhattan Corp.
The buildup has cost Canadian Imperial nearly $60 million pretax over the six months ended April 30, and contributed to a $18.5 million drop in after-tax earnings to $142 million for its second quarter, also ended April 30.
Canadian analysts expressed concern that the payback may not justify Canadian Imperial's costs.
"The time and energy they are expending on this may be hurting their other businesses," said one analyst who declined to be identified.
Other analysts, however, said they believe Canadian Imperial is pursuing an extremely conservative strategy by taking all of its costs up front.
"They've been very consistent in pursuing their strategy and they're not exactly betting the bank on this," noted Hugh M. Brown, a banking analyst with Nesbitt Burns Inc., in Toronto.
He observed that Canadian Imperial earned 56 cents a share in the second quarter. After-tax second-quarter cost to earnings per share came to only around 10 Canadian cents, or slightly more than 7 U.S. cents.
There has been a steady stream of departures from S.G. Warburg, one of London's best-known investment banks, since the bank several weeks ago agreed to be acquired by Swiss Bank Corp. Canadian Imperial, however, sought to dispel speculation it was poaching, noting in a statement Tuesday that "hiring of the team was accomplished with the knowledge and cooperation of Warburg."
"Warburg proactively sought placement for the team and, as a result, had discussions with several multinational banks."
Toronto-based Canadian Imperial has $116 billion of assets, making it the second-largest financial institution in Canada.
As part of the buildup, Canadian Imperial said Tuesday it is seeking approval from the Federal Reserve Bank of New York to become a primary dealer underwriting U.S. government securities.
Wood Gundy already holds powers to underwrite private sector corporate debt and equity under Section 20 of the Bank Holding Company Act.