John Reed's pronouncements that Citibank and Travelers Group are not merging fast enough may be too severe. The banking group's merged corporate and investment banking divisions are trying their best to show otherwise.
The two have not been involved in a huge number of deals together but last month's $100 million securitization for the Argentine national airline, Aerolíneas Argentinas, was a major landmark.
The deal is innovative on several fronts: future receivables from 10 different countries are used; the bond is targeted at institutional investors around the world through a 144a structure; and much of the risk is transferred on to the reinsurance market. For a company in the midst of a restructuring programme, from a country finding it tough to get international financing at present, it's an impressive achievement.
How are the two units, commercial bank and investment bank, organizing such deals? Citi and Solly [Salomon Smith Barney from the Travelers side of the merger] are now acting in "bookend roles", according to a press release. A cute little phrase to describe Citi's role at one end in structuring the deal, and Solly's as the underwriter at the other.
It stands as proof, says Citigroup's ever active PR department, of the rationale for the merger of the two financial behemoths last year.
The deal employed some heavy guns. Four senior bankers from Citi-Solly were involved - Citi's global aviation head Tom Hollahan; Citi's global securitization head Al Hageman; John Kelly, head of insurance derivatives at Citi-Solly; and Citi's country corporate officer for Argentina, Carlos Ferdigotti.
With so many structures becoming commodities, future investment banking profits definitely lie in the tailored transaction.
On this evidence Citigroup is off to a good start and Reed, who has expressed dissatisfaction with the pace of the merger, shouldn't worry so much. But then that's what the boss is paid to do. AC