Awards for Excellence 2002
Citigroup
It wasn’t hard choosing this year’s best bank. Glance down the list of global awards below and you’ll find that Citigroup wins seven out of 19, more than one-third. Its successes range from debt markets to cash management and foreign exchange, even to equity where it is the coming force that the established equity market leaders most fear. Watch out in M&A next year.
|
Sandy Weill and Michael Carpenter: from work in progress to winning model |
||||||
Does Citigroup owe its success simply to cross-selling from credit to other products at a time when liquidity is scarce and corporates are desperate for banks’ support?
Carpenter argues that it’s not that simple. “First of all no company will give any piece of business to you unless you are functionally excellent,” he says. “We believe we have to be excellent in debt, equity and M&A and then we will tend to win the ties as a key relationship bank. For example, Citibank had great relationships with the 2,500 biggest corporations in the world but in European corporate debt it was about 18th and occasionally a co-manager. Salomon Smith Barney had the fixed-income expertise but without the European presence of Citibank or Schroders. Combined we are a much more compelling choice for bookrunner assignments and we are now number two in European corporate debt.”
Going to the next level
The challenge for all the universal banks, including Deutsche Bank and JPMorgan, has been to expand those kinds of debt successes to other markets such as equity. Citigroup’s market share is growing – in global equity underwriting from 8% to 12% by the end of 2001 – and it has been growing again this year. Carpenter says: “If you are a CEO who is going to do a secondary equity offer, if you give it to a monoline investment bank, you may or may not get good execution but you get nothing else back. As long as the CEO considers a firm with broader capability can also execute that deal well – and we wouldn’t be gaining market share otherwise – then giving that deal to us adds something to the totality of the relationship.”
It may sound a bit fuzzy but this is the thinking behind Citigroup’s corporate and investment banking strategy: not so much to cross-sell but to gain the position of being the most trusted principal financial adviser for its target clients. Carpenter says: “Going to the next level is not so much about numbers and market share, it means becoming the organization that customers first look to for advice on their most critical issues – whether those be treasury issues, forex or M&A. Remember that we can be product indifferent.”
What if anything could trip Citigroup up? Is it too large to be manageable? Are its risks controllable? Carpenter believes size has evident advantages. “Financial services is still the most fragmented industry I know,” he says. “Each of the product areas is consolidating and has enormous economies of scale.” Citigroup claims to be the low-cost producer in these markets. Controlling expenses is a Sandy Weill hallmark. “We realized at the end of 2000 that the bubble was bursting and markets were going to revert to a historical trend line, so we adjusted our costs to that new market reality,” says Carpenter.
Credit losses have been substantial and surprising in Argentina, though Citigroup’s vast net income has swallowed even these. On his patch Carpenter notes: “Credit is a scarce resource and rarely profitable to extend, so it’s only something you do for your best relationships and in the past 12 months CEOs have finally understood that. We have a good underwriting process, good portfolio management and strong workout capability.”
Peter Lee
