CHICAGO - The Chicago-based Griffin, Kubik, Stephens & Thompson Inc. name is no more.
BMO Capital Markets on Friday formally introduced its recently reconfigured municipal platform for clients that blends the Griffin Kubik and BMO teams following BMO's acquisition of the boutique firm this past spring.
With the increased banking staff and sales, trading, and distribution capabilities Griffin Kubik brings to the table, the firm hopes to expand upon its strong bank-qualified, middle-markets business, while also growing in stature among underwriters nationally.
David M. Thompson, 63, a managing director, will oversee the fixed-income taxable and tax-exempt groups. He reports to Charlie N. Piermarini, 51, executive managing director of debt products and head of the securitization group at BMO, the investment banking arm of the Bank of Montreal. It is better known locally as Harris NA the name under which BMO has maintained its commercial banking operation purchased in 1984 and its wealth management unit.
The merged group includes about 100 Griffin Kubik professionals in that firm's main offices in Chicago and Milwaukee and another 20 from BMO's U.S. base in the Chicago area. About 10 professionals were cut prior to or during the merger.
The team includes about six bankers, though Thompson said he expects that number will grow. With a more "potent" distribution network "we need more and more product," he said in an interview last week.
As the firm reviews its platform for growth opportunities amid dramatic changes in the municipal market stemming from the credit crunch, layoffs and the collapse of the auction-rate market, Thompson and Piermarini hope to capitalize by increasing the firm's government work and possibly branching out into the housing and health care sectors.
The public finance expansion could also reach beyond the merged firm's Midwest base, as BMO has a physical presence across the country in New York City, Boston, Atlanta, Houston, Phoenix, and San Francisco.
The firm also hopes to bolster its public-private partnership work, capitalizing on its Canadian parent's international experience advising, underwriting and financing transactions, although Piermarini sees that area as a slower growth market given the political issues involved in privatizing existing assets and using private partnerships to construct new ones.
Prior to the Griffin Kubik acquisition, BMO had its eye on increasing its distribution capabilities bringing on board five municipal sales and trading professionals from LaSalle Financial Services Inc. which Bank of America shed as part of its acquisition of LaSalle Bank last year.
BMO and Griffin Kubik officials began talking over a year ago as Griffin Kubik's principals sought to ensure the firm's future given the long tenure of many of its professionals and the anticipated retirement of one of the principals. The boutique built its business over the last 40 years offering clients both tax-exempt and taxable fixed income products along with trading, underwriting, portfolio analysis, and credit research.
Thompson, a founding principal, sees those fundamental offerings as a strong sell amid the ongoing credit crunch and turmoil at Wall Street broker-dealers and other firms struggling with the subprime mortgage related losses of their commercial banking parents and the downgrades of monoline insurers.
"It's back in vogue to know something about credit," he said, noting that few questioned such underlying issues when looking at triple-A insured paper. "It's refreshing to be asked those kinds of questions again."
The marriage in some respects seemed natural given the roles both firms play in the middle-markets, the distribution networks of both, and their mutual business philosophy supported by a profitable client-driven business with limited capital requirements and risks. Griffin Kubik had no auction-rate securities on its books while BMO had very limited ARS exposure ahead of the collapse of that market earlier this year.
While the firm seeks to move up in rankings, that growth could be limited to the top 15 as more capital risks would be required to crack the top 10, Piermarini acknowledged. "Our goal is not to be big just to be big," he said, stressing the focus on profitability.
In its last reported quarterly earnings, BMO Capital Markets reported net income of $182 million and that equity and debt underwriting revenues were down from strong levels a year earlier, but up from the previous quarter.
In commenting on the acquisition, the filing notes that the combined group is the largest bank-qualified municipal bond dealer in Illinois and sixth-largest in the United States. "Municipal bonds are a client-driven business and fit well with our overall business strategy," the filing read. The firm's last quarter earnings are expected in the coming weeks.
Overall among senior managers, BMO's Harris ranked 47th last year and 36th so far this year nationally while Griffin Kubik ranked 58th last year and 41st so far this year, according to Thomson Reuters.
On bank-qualified small issues, BMO ranked 15th last year nationally and 15th so far this year while Griffin Kubik ranked 20th last year and 18th so far this year. In Illinois, BMO ranked 15th among senior managers in Illinois and 11th so far this year while Griffin Kubik ranked 21st last year and 17th so far this year.