First Union Corp. on Thursday promoted the two men leading its investment banking operation to run the entire capital markets group, a role filled by G. Kennedy Thompson before he became president and chief operating officer of the banking company at yearend.
W. Barnes Hauptfuhrer and Stephen E. Cummings, both will have the same title -managing director - but are now responsible for the structured-finance and the fixed-income groups and will continue to head investment banking at First Union Securities, a division of the Charlotte, N.C., company.
Colleagues dating back to the early 1980s when they worked at the now-defunct New York broker Kidder Peabody, Mr. Hauptfuhrer and Mr. Cummings were responsible for much of the hands-on integration of the three securities and investment banking firms acquired by $253 billion-asset First Union over the last two years.
Now at the helm of the 5,600-person capital markets division, Mr. Cummings said that he and Mr. Hauptfuhrer will work on a common marketing approach for products - which range from foreign exchange to mergers advisory - that share similar customer bases.
Both men became co-heads of investment banking early last year, and since then have been positioning First Union as a bank that can cross-sell all its capital markets to its corporate clients, mostly growing middle-market companies.
In 1998, First Union bought the Richmond, Va., brokerage Wheat First Butcher Singer Inc. and the Charlotte mergers specialist Bowles Hollowell Conner & Co. of Charlotte, where Mr. Cummings had been chairman.
Mr. Hauptfuhrer started at First Union in 1988, when he founded the company's private equity investing arm, First Union Capital Partners. Last summer First Union lured 30 people from Deutsche Banc Alex. Brown's equities group in Baltimore, where First Union established an equities trading floor. In October it acquired Everen Capital Corp. of Chicago, adding about 20 investment bankers.
"Over the last year, we've really invested in developing a better and bigger coverage system" for First Union clients, Mr. Cummings said.
The deals have paid off - particularly for the company's private equity efforts, which registered a $578 gain from venture capital investments in 1999.
Mr. Hauptfuhrer points to derivatives as another area that has been successful for the bank, but which could be better marketed to First Union's corporate clients.
"They've got the right model: They want to push capital markets down to the corporate client base so they aren't losing those clients to other investment banks or to the public markets in general," said Andrew Collins, an analyst at ING Barings.
In the divisions newly under the control of Mr. Hauptfuhrer and Mr. Cummings, Brian Simpson will remain managing director and head of structured finance, and Steven Kohlhagen as managing director and head of fixed-income. The group will continue to grow, though nowhere near the pace of its 1998-1999 acquisition phase. First Union plans to hire investment bankers at all levels this year, Mr. Hauptfuhrer said.
Capital markets have already been a revenue producer at First Union, increasing 37% to $3.13 billion last year even though the company has yet to make a real mark in key areas like advisory or underwriting of initial public offerings.
Last year, First Union was not among the top 25 in underwriting common stock or advising on mergers and acquisitions..
"What I'd like to see in 2000 is better growth in more traditional underwriting and advisory revenues, or pure investment banking" at First Union, said Susan Roth, an analyst at Donaldson, Lufkin & Jenrette Inc.
Still, the growth of capital markets helped elevate Mr. Thompson, who oversaw acquisitions like Wheat First, to president. He was named to that position in late July when then-president John R. Georgius said he would step down.
