PICTURE A METEOR STRIKING A THRIVING LANDSCAPE and wiping out an entire species. Thatâ€™s how Wall Street veteran Bernard Beal describes the devastation of the credit crisis of 2008.
Calling the event a â€śseismic change in our marketplace,â€ť the CEO of New York-based M.R. Beal & Co. (No. 5 on the BE Investment Banks list with $543.7 million in senior managed issues) laments the changing face of the nationâ€™s major financial center with J.P. Morgan Chaseâ€™s takeover of Bear Stearns; Lehman Brothers being forced into bankruptcy; and Goldman Sachs and Morgan Stanley opting to become bank holding companies. â€śIf you wouldâ€™ve told me even a year ago that none of the broker dealers would exist in their current form a year later, I wouldâ€™ve said no way.â€ť
Beal is candid about the fact that his firm is feeling the credit crunch. He notes that revenue dropped 30% in September compared to the same month last year. Although overall revenues at M.R. Beal are still up for 2008, income from underwriting bond issuesâ€”in both the corporate and municipal finance businessâ€”fell. As a result, he says the firm is rethinking its strategy. The firm is bringing back its federal financing area, using employees who have been previously retrained to focus on the equity market. â€śWeâ€™re going to ask them to pull out their old uniforms and start going in that direction,â€ť Beal says. Beal also says his firm plans to re-enter the asset management business, which it sold off.
For the banks, brokerage houses, and insurers left standing, the challenges in 2009 are many. â€śThe financial service industry has been hit hard over the last year due to liquidity issues stemming from bad investments in the U.S. housing market, namely mortgage-backed securities,â€ť says John Foff, a senior analyst at SNL Financial, a Charlottesville, Virginia-based tracker of data for the financial services industry. â€śThe challenge going forward is for business to restore confidence among American investors and consumers.â€ť
Bealâ€™s â€śseismicâ€ť analogy is apt. In the natural world, disasters and extreme events force species to adapt, evolve, and find new ways to survive. Itâ€™s no different on Wall Street. Uncertainty in the credit, real estate, and equity markets, and fears of a recessionâ€”despite the bailout planâ€”are forcing commanders at some of the nationâ€™s top black-owned financial service companies to alter strategies and find new sources of revenue. Aggressive marketing, targeting new