The Muni Banking and MA Businesses in 2022 - A BDA Q&A with David Medanich of Hilltop Securities

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Mike Nicholas, BDA:

How’s business - both muni banking and muni MA in 2022 and as compared to 2021 and 2020? HTS as we as the market , has started off alittle slower than 2020 and 2021. Tax exempt over all about 20% less than last year as well as taxable off about 40 %. The market will adjust as we normally do.

David Medanich, Hilltop Securities:

As everyone is aware, the Municipal Market started slow this year with tax-exempt issuance down 20% and taxable municipal issuance off 40%. The bright spot we have seen in the market is new money issuance is slightly positive. We have seen this trend before and it is a matter of time before the market recovers. Our view is that overall issuance will not be at the expectation of many predictions of a $500BN market.

BDA:

Tell us about how the muni business at Hilltop is structured - between traditional trading and sales to MA and banking. Has the focus changed since 2019 when Brad Winges took over as CEO?

DM:

The focus of our business continues to be our clients, that has not changed since Brad took over. What has changed is we have become more focused on product lines and services that we can offer our clients across different sectors. Generally, our business is broken into two elements: Investment Banking and Municipal Advisory, along the regulatory divide. Our strength is our people who have the ability to serve different clients, in different capacities acting as a solution provider.

BDA:

How do you see the federal infrastructure bill passed in 2021 impacting the muni market in Texas and the southwest - and Hilltop’s business?

DM:

It has been beneficial to some of our municipal clients, it is $500 billion spread out over 9 years, as this time it really has not had a significant impact on our business, but we expect an impact once fully implemented, similar to BABs.

BDA:

The muni market is heavily regulated with the burden really falling on dealers. Are there any particular regulatory issues - or proposals - which you are most focused on?

DM:

They are all important, we cannot afford to take any for granted. We have always been advocates for fair level playing that is transparent to our clients.

BDA:

The State of Texas’ approach to banks and gun manufacturers has gotten a lot of attention. How, if at all, has this impacted Hilltop’s business?

DM:

Hilltop was already expanding our Underwriting presence in Texas prior to the legislation. We continue to serve our clients.

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BDA:

Expansion in the pipeline? Is Hilltop expanding their muni reach and if so, into which geographic regions and more in banking or MA?

DM:

Yes, we are a national firm and continue to look at all of the markets where we can attract individuals that can be accretive to our platform.

BDA:

Last question - what current industry issues do you think are worthy of trade group action and focus through the BDA?

DM:

Continue to believe that everyone should play within their regulatory roles and not fuzz the line
Clear delineation of what roles a firm can play between Municipal Advisor and Underwriter
We think that firm resources and ability to stand behind their opinions is just as important today as ever as you go to the market and we see lack of appreciation