Crisis & Opportunity

PICTURE A METEOR STRIKING A THRIVING LANDSCAPE and wiping out an entire species. That’s how Wall Street veteran Bernard Beal describes the devastation of the credit crisis of 2008.

Calling the event a “seismic change in our marketplace,” 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 nation’s major financial center with J.P. Morgan Chase’s takeover of Bear Stearns; Lehman Brothers being forced into bankruptcy; and Goldman Sachs and Morgan Stanley opting to become bank holding companies. “If you would’ve told me even a year ago that none of the broker dealers would exist in their current form a year later, I would’ve said no way.”

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 issues—in both the corporate and municipal finance business—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. “We’re going to ask them to pull out their old uniforms and start going in that direction,” 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. “The 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,” says John Foff, a senior analyst at SNL Financial, a Charlottesville, Virginia-based tracker of data for the financial services industry. “The challenge going forward is for business to restore confidence among American investors and consumers.”

Beal’s “seismic” analogy is apt. In the natural world, disasters and extreme events force species to adapt, evolve, and find new ways to survive. It’s no different on Wall Street. Uncertainty in the credit, real estate, and equity markets, and fears of a recession—despite the bailout plan—are forcing commanders at some of the nation’s top black-owned financial service companies to alter strategies and find new sources of revenue. Aggressive marketing, targeting new

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