It is "morning in America" if you happen to be a non-bulge bracket bank. Think about it: your larger, previously-unassailable competitors have either dissolved or are consumed with their own issues (TARP, compensation, regulation, risk management, etc) and now, finally, second- and third-tier institutions have a historic chance at grabbing market share.
From a media relations perspective the opportunity is simply amazing. Again, think about the landscape: Bear Stearns - gone; Lehman - gone; Merrill Lynch - gone(ish); Citigroup - utterly consumed with their own operating issues; Morgan Stanley - retrenching, then expanding, probably only to retrench again; Bank of America - too big to succeed. These firms were the go-to providers of analysis in media coverage of capital markets, equity research, corporate earnings, M&A, industry trends, currency markets, economic trends, etc. They simply dominated the Wall Street Journal, Reuters, Bloomberg, BusinessWeek, The New York Times, and other major financial media. Not any more.
Not only have firms disappeared or retrenched, but the reputations of the survivors are seriously compromised. First came the questions of culpability of major banks in the mortgage/financial crisis. Then came the restrictions accompanying TARP bailouts. Now, the big banks are up against the wall over the issue of compensation. This will be the hardest bullet to dodge and look for compensation issues to persist througout 2010.
Moroever, the media understand now that they have almost a fiduciary duty to broaden their sources away from the large banks and trading firms. This, combined with heightened skepticism by reporters and deeply seeded resentment (in my opinion) about compensation practices, opens the door like never before for smaller firms in virtually every financial sector to enhance their brands and market themselves through the media.
Since September, my firm has been representing a small fixed-income broker-dealer that had no previous experience in working with media. Our hypothesis at the start of the engagement was that the media would welcome a new voice for analysis of credit market trends. We were right and even underestimated media demand for the client's perspective. More than 80 stories in major financial media cited the firm's credit market expertise.
I mention this to underscore the size of the opportunity for firms that previously may have been at competitive disadvantage when it came to media relations. Even compensation comes into positive focus in a story about a mid-tier broker-dealer like Jefferies.
Already, non-bulge-bracket firms are scrambling to fill the vaccuum created in markets ranging from credit trading to M&A advisory. Firms like Cantor Fitzgerald are hiring like crazy. Citadel's foray into investment banking has been well chronicled. Now, Blackstone is said to be interested in entering the banking market in the U.K.
[Update: The February 8 issue of Barron's profiles Jefferies, Broadpoint and other firms hoping to capitalize on the troubles at big banks.]
It's not all downhill sledding, though. Last summer the head of marketing of a leading broker-dealer told me that despite all the carnage at the top of the market, his firm's research showed lingering client preference for doing business with the old guard firms.
Asserting themselves more through the media can help mid-size firms overcome client inertia to expanding their list of preferred banking and trading partners.
To illustrate how much the compensation issue can derail the large banks, here is a sampling of recent stories:
Goldman caps London bankers' comp (Bloomberg)
Morgan Stanley chief to receive up to $13 million bonus (New York Times)
Investment bankers on bonuses: "less show, no tell" (New York Times)
Reputation risks associated with bank bonuses (Hedge Lines, January 2009)