PhillyDeals: Janney refocuses banking efforts with personnel changes

When

Janney Montgomery Scott

, the largest investment bank and brokerage based in Philadelphia, moved across Market Street to new offices in 2011, Pennsylvania offered the firm $11.5 million in grants. State officials justified the gifts with the expectation that this would keep 550 high-paid Janney jobs in the city, and the hope that it would add more.

Instead, despite a robust stock market, Janney employment in Philadelphia has fallen, to 508 last month. The firm employs 1,851 nationwide.

The drop in employment cost Janney $500,000 in state grants tied to hiring and training. The state has paid Janney the remaining $11 million, mostly matching funds from the Redevelopment Capital Assistance Program to cover the cost of the move, state spokeswoman Heidi Havens said.

It's not just Janney, spokeswoman Karen Shakoske told me: Traditional investment banks have consolidated since the financial crisis.

The total number of investment bankers, who are paid fat fees to buy, sell, and restructure companies, plus associated traders, stock analysts, and salespeople, fell to 51,700 last fall, from 64,600 in 2010, at Goldman Sachs, JPMorgan, and eight other big multinational investment banks, reported the London-based bank tracker Coalition Ltd.

Beyond those big banks, which move markets in government bonds, take large companies public, and close financing deals, regionally based banks like Janney manage state and municipal bond sales, specialized private financings, and smaller slices of big Wall Street deals.

Some of the departed were senior figures. Janney's top investment banker, Christopher White, left in December, followed by two of his senior managers and at least half a dozen other capital-markets professionals. White was replaced by two of his former lieutenants with sales experience, Cliff Booth and Joe Culley.

Equity research director Gary Schatz was also let go in December, and analysts covering tech, financial, and retail firms - more than one-third of Schatz's staff - also departed. Schatz was replaced by product-management head Andrew Maddaloni.

Janney changes with the times, Shakoske said. It has lately refocused its banking efforts and research coverage on small and midsized health-care, media-tech, regional utilities, consumer, and finance companies.

Last week research director Maddaloni named five new stock analysts, covering utilities, real estate, biotech, and pipelines, a sector in which Janney has reported a large share of its recent deal flow. Janney's bond desk last week also added three analysts and promoted another.

Investment-banking-related activities are about 20 percent of Janney's total business, the firm says. The rest is retail brokerage and money management, which Janney says has done well in the recent bull market.

Janney traces its roots to 1832. It is a survivor from a once-robust Philadelphia investment-banking scene that included the Anthony J. Drexel firm, where J.P. Morgan learned his trade, and the predecessors of New York's Smith, Barney & Co.

As a firm, Janney has been profitable in each of the last 20 years, the firm says, though its owner, Penn Mutual Life Insurance Co., won't disclose detailed results.

Profits are welcome, but steady results in a volatile business raise the question: Is Penn Mutual demanding short-term profits at the expense of long-term investment-banking continuity?

"While Janney is owned by Penn Mutual, it operates independently and in line with their own strategies and objectives to optimize performance across all market cycles," chief executive Eileen McDonnell wrote.