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July 20, 2018  

RBC Recruits Pair of CP Pros From BofA

RBC’s commercial-paper unit has picked up two high-profile professionals from Bank of America.

Ralph Esposito had been a managing director handling commercial-paper origination, sales and trading at BofA, with John Widmeier serving as his deputy on the trading side. Now, Esposito is playing a key role involving sales and trading of both secured and unsecured short-term securities in RBC’s New York office — with Widmeier helping to oversee trading of those instruments.

They join an already-established team that includes commercial-paper origination and investor-development head Mark Hernandez.

Sources describe the additions as some of the biggest seen in the sector in recent years, with the potential to instantly raise RBC’s profile.

Indeed, RBC especially has been pushing to expand its footprint in the asset-backed commercial-paper market, both as a dealer and conduit operator. That effort is aimed in part at positioning the bank to capitalize on potential issuance growth, at a time when large banks including BofA, Deutsche Bank and Goldman Sachs have become less active.

The exits of Esposito and Widmeier from BofA underscore that shift, with sources suggesting that the bank isn’t particularly enthusiastic about acting as a dealer for other institutions. It already shuttered its own conduits in the wake of the 2007-2008 market crash. “Bank of America just doesn’t have much of a presence. They’re not doing a lot anymore,” one conduit administrator said.

Esposito and Widmeier worked at the bank since 2006.

RBC, meanwhile, ranks among the 10 largest asset-backed commercial paper dealers — but well behind leaders including J.P. Morgan and Citigroup. It also operates two conduits. Old Line Funding, whose holdings include auto loans, auto leases, student loans and credit-card accounts, had $9.8 billion of its paper in the hands of investors at yearend 2017, according to Moody’s. Bedford Row Funding, encompassing a mix of loans and debt securities, had $9.7 billion of securities outstanding.

The bank’s strategy in some ways resembles the one it employed in the asset-backed bond underwriting business after the crash, when it took advantage of an exodus among former market leaders to claim a top-10 presence in the market.

Buoyed by a wave of new investors, the amount of conduit paper outstanding worldwide rose to average of $333.5 billion during the fourth quarter of 2017 from $314.2 billion a year earlier, according to Moody’s. The Federal Reserve, which doesn’t parse out conduits, said there was $245.3 billion of asset-backed commercial paper outstanding in the U.S. on July 18, up from $239.9 billion at yearend 2017. That’s down from $1.2 trillion in 2007.