Citigroup made a statement with a flurry of recent senior hires in its banking, capital markets and advisory arm: it wants to bulk up and become a stronger force in its home market.
Citi last week hired seven senior investment bankers from rivals, including three from troubled Deutsche Bank and three from Goldman Sachs. Most notably, all were hired in the US - either in New York or San Francisco.
That’s significant for a bank that is active in more than 100 countries and has a global network envied by most rivals.
“We’re an American bank with unique global reach. The largest economy and the one that’s growing with the greatest stability is the US,” said Tyler Dickson, co-head of the banking, capital markets and advisory (BCMA) unit that was formed in September.
“The United States has outstanding economic characteristics, and great scale, and we have home court advantage.”
The US has not only the biggest and deepest capital markets - it also offers the fattest margins and profitability prospects, if banks can break into the top tier. Many overseas firms have struggled to do that, leaving the big five US banks as the dominant players.
Citi often ranks as fifth of those five in its home market, however, and wants to improve that.
“Our aspiration is to be top three globally, so you’re not going to be top three unless you do well in the US,” said Manuel Falco, co-head of BCMA alongside Dickson.
“North America is a tough market because you need high quality, on-the-ground resources and a long-term strategy, but it’s the best market in terms of profitability and size and also if you do well, such as in technology and healthcare, you can export that globally. So being strong in North America is very important to a global strategy.”
Dickson and Falco told IFR the recent hires were consistent with priority areas they identified when BCMA was formed nine months ago: build up in North America, technology and healthcare sectors, and in financial sponsors.
BCMA pulled together Citi’s capital markets origination with its corporate and investment banking, so M&A advisory sat alongside helping companies raise debt and equity - bringing it in line with the set-up at many of its rivals.
“We’re very keen on growing technology, healthcare and the sponsors business, and getting stronger around the world, but in particular in North America. What we’ve done is consistent with that,” said Falco.
That’s likely to continue, albeit under the constraints of challenging markets and the cost pressure on Wall Street.
“We’re being selective and targeted and I think we’ll continue on that path. If we see talent that’s complementary to the strength of our existing team then we’ll add, otherwise we’ll be patient,” Dickson said.
“We’re mindful that the environment is complicated and it’s growing, but not at the same pace the world was growing a short time ago and there are some risks out there, so we’ve got to be prudent and measured.”
That includes pruning in areas of less potential. “That’s a healthy part of managing a high talent organisation,” Dickson said.
Investment banks are set to report lacklustre results for the second quarter in the coming weeks (see Top News story). Q2 fees from debt and equity underwriting and M&A advisory fell 23% from a year ago, according to Refinitiv data, leaving fees for the first six months of the year down 16% from a year ago.
Citigroup fared slightly better, however. Its first-half fees were down 11% and it ranked fourth globally with a market share of 4.8%, up 25bp from the first half of 2018, the biggest share gain of any bank, Refinitiv estimated.
Citi’s recent hires included Mark Keene as global co-head of technology, alongside Herb Yeh, and Liz Milonopoulos and Brian Yick as co-heads of internet investment banking. All four are based in San Francisco.
Citi is not alone in ramping up its technology team. Barclays, UBS and Credit Suisse have hired tech bankers, especially in the US, and the top three industry advisers - Morgan Stanley, Goldman and JP Morgan - are also defending those positions as dealmaking in the sector stays hot.
Banks are also having to rethink their technology teams as the industry spreads into other areas and transforms old economy companies like industrials, consumers.
“We see it as an eco-system that’s much bigger than just the technology sector today,” Dickson said.
“The transformation of all industries and an acceleration in the pace of change and disruption has meant the more insight you have on data, or artificial intelligence or the use of technology to improve efficiency and re-engineering, influence everything.”