U.S. Bank gutted its long-term municipal bond underwriting, sales and trading desks in New York City in a shakeup that also claimed banking and other positions nationwide, market sources told The Bond Buyer.
The cuts that came down Wednesday hit across of the municipal team with banking, underwriting, analytic, sales and trading professionals let go, as well as a derivatives specialist, and operations and management professionals. Nearly half of a 36 to 37 member team possibly lost their positions across all offices, said sources.
About 10 to 12 banking positions were eliminated, one source said.
The profitable short-term desk in New York, which was built up in recent years and manages remarketings, was unaffected, according to the sources. The firm's bank loan business was not impacted and it will continue to offer bank support and direct loan products.
The New York-based long-term sales and trading desks were hit the hardest with multiple sources saying the firm shed nearly all of those teams.
The bank confirmed that changes were made to its municipal group that included the elimination of some positions but the firm declined to provide specifics on the extent of the overhaul.
“U.S. Bank’s Municipal Products Group is repositioning its business to focus on increased growth opportunities. This is a proactive strategy for anticipated market transformation,” the bank said in a statement emailed to The Bond Buyer on Wednesday.
“As a part of this we have rescaled our business in certain locations, including New York … As a part of this repositioning, we did eliminate and reposition a few roles, but are not providing details on the individuals or where they were based,” the statement added.
The firm said it remains a player in the municipal field.
“We remain fully committed to providing our clients with a full, comprehensive suite of municipal products offerings to help in achieving their financing goals and look forward to continued growth in our position in the municipal market,” the bank said in its statement.
Others, however, questioned both the firm’s commitment going forward and its ability to pursue deals.
“How do you market yourself to an issuer if you don’t a long-term desk,” said one market source. “They will be very much limited to offering bank support and floating-rate products. Maybe they think they can do it with the people they kept.”
Infrastructure will remain a key banking area going forward as well as utilities and other corporate like credits. In addition to New York which houses its desks, the firm has public finance offices in Charlotte, Chicago, and San Francisco, according to The Bond Buyer's Municipal Marketplace Red Book.
The action was dropped on staff without warning, one source said. The firm’s decision, however, did not surprise many.
The firm has cut or lost some key leaders and veteran bankers over the last several years, and one source said some internally began questioning the firm's future commitment to public finance, particularly specialty sectors like healthcare and higher education, after Rick Kolman’s departure in 2016.
Kolman, who built the bank’s municipal bond department, had been the head of the municipal securities group. He is now head of the Municipal Securities Group at Academy Securities.
One market participant said the moves came as no surprise since the bank had not been as active recently in municipal bond underwriting as it had been in past years. “It was the next logical step,” the source said, adding that no one in the market was taken by surprise by the news.
Sources said the firm was off its municipal revenue targets like others and with underwriting spreads squeezed and greater regulatory demands and a possible drop on bonding in a post-tax reform market, more could follow in scaling back their municipal groups and products offerings.
Minneapolis-based U.S. Bancorp, with $462 billion in assets as of Dec. 31, 2017, is the parent company of U.S. Bank National Association, the fifth largest commercial bank in the United States.
The firm operates 3,067 banking offices in 25 states and provides banking, investment, mortgage, trust and payment services products to consumers, businesses and institutions.
The firm ranked 47th among senior managers nationally last year, 54th in 2016 and 53rd in 2015, according to data from Thomson Reuters.
U.S. Bank rebuilt its municipal business after spinning off in 2003 its broker-dealer arm Piper Jaffray which had been acquired in 1998.