With a new chief executive officer about to take the reins of its equity trading arm, HSBC Investment Banking is preparing for a makeover.

The investment bank, analysts say, has some legwork to do to attain the success that HSBC Holdings PLC has had in its overall commercial banking business.

"The challenge is to integrate the global securities business more closely with commercial banking operations and to make a good bottom line for the firm, " said James O'Donnell, 35, president of HSBC Markets Inc., who next month will become chief executive officer of HSBC James Capel, the equity trading unit.

Both Mr. O'Donnell and Richard Coleman, a bank analyst with Merrill Lynch & Co., agree it must take advantage of HSBC's network and customer base.

Mr. O'Donnell's strategy includes upgrading James Capel's research capabilities, expanding the trading side, and building a global distribution arm for corporate finance product capabilities.

He said that although HSBC James Capel's research capabilities are strong in Europe, "other areas of the world need to be improved."

The trading side of HSBC James Capel began developing a year ago. Before that, it served only as an agency house, which acts as an intermediary between buyers and sellers.

With offices in London and New York, the growing unit trades both local shares and American depositary receipts.

The distribution arm is most important for success. HSBC James Capel has been busy proving its retail and institutional distribution capabilities.

This week the group served as joint global book runner with Salomon Brothers for the privatization for Ote, the Greek telecommunications company. Book runners are responsible for the pricing and allocation of shares.

On Tuesday the group handled an equity placement for Jiangsu Expressway, a Chinese company.

Mr. O'Donnell, who will work mostly in the United States this year and relocate to London early next year, joined HSBC in April 1995 as president and chief executive officer of HSBC Securities Inc.

He has been president of HSBC Markets Inc. since January.

HSBC Markets is the parent of HSBC Securities, a New York-based, wholly owned subsidiary of HSBC Holdings PLC., London.

Before joining HSBC, Mr. O'Donnell was president and chief executive officer of Natwest Securities Corp.

Mr.O'Donnell, who retains his position as president of HSBC Markets, will report to Bernard Asher, chairman, HSBC Investment Banking. u

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