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Best Emerging Markets Investment Bank: Citi |
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Also nominated: Credit Suisse, Goldman Sachs and HSBC |
Citi’s long-standing global presence, strong balance sheet to support key clients and broad array of commercial and capital market products are indelible features of the international banking landscape. Years before US and European bulge-bracket firms pledged to attach themselves to the emerging market growth engine while intermediating trade and capital flows, Citi considered itself to be the leading corporate and investment bank in developing economies.
Its full suite of commercial and investment banking products as well as the authenticity of its local presence in key emerging markets are mantras frequently recited by Citi’s senior bankers. As most Citi executives are quick to point out, the bank boasts a local presence in 100 countries – more than any other global investment bank – while conducting business in 160 in total.
In recent years, emerging markets have formed the central pillar of Citi’s post-crisis rehabilitation. The bank’s structural revenue growth prospects, driven by its consumer and transaction services business in key developing economies, are frequently cited as a key factor in the new-found optimism about the bank. But it’s high time that credit was bestowed on Citi for the success of its emerging markets-related investment banking business in particular.
The bank generated $457 million in investment banking fees between April 1 2011 and March 31 2012, ranking fifth, according to Dealogic. But over the past year few investment banks have demonstrated their capital-raising and advisory prowess across as many emerging regions, with a healthy range of products from bonds, loans, equities and commodity financing to structured transactions. By emerging market deal value over the awards period, Citi notched up first place in M&A, third in ECM, second in DCM and third in the syndicated loan markets, according to Dealogic data.
In DCM, the bank led two of the biggest transactions in emerging market history: Russia’s $7 billion sovereign bond and Petrobras’s $7 billion blowout, Brazil’s largest-ever corporate debt offering. The bank also led the Government of Malaysia’s $2 billion dual-tranche offering, the largest-ever sovereign dollar sukuk. In the Middle East, it helped launch the $5 billion Qatar bond and First Gulf Bank’s wakala-mudaraba sukuk last July, reflecting its ability to launch both large and innovative transactions.
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“We are also able to leverage Citi’s vast global network to partner with leading emerging market companies as they seek to enter the developed markets”
Tyler Dickson, head of global capital markets origination, Citi |
In M&A, the bank has acted in key transactions including Mexichem’s acquisition of Wavin and América Móvil’s $6.5 billion increase of its majority stake in Telmex in October 2011. Demonstrating Citi’s diversified franchise across the emerging Asian region, over the past year the bank has been involved in about 20 of the largest transactions, across ECM, G3 debt and cross-border M&A, while maintaining its strength in project finance.
In sum, reflecting the strategic importance of emerging markets-focused investment banking to Citi, in the 2011 fiscal year almost half of Citicorp’s revenues and nearly 60% of its net income was generated in developing economies. Tyler Dickson, head of global capital markets origination, sums up Citi’s EM strength: “Three elements that define our emerging markets investment banking franchise are our long-term commitment to these markets; the stability, experience and expertise of Citi’s senior EM specialists; and the depth and breadth of our global connectivity, which is unmatched in the industry.”
Connecting clients across the emerging and developed world will prove crucial to revenue generation in the years ahead, Dickson argues. “Given our experience and presence in both DM and EM, we are also able to leverage Citi’s vast global network to partner with leading emerging market companies as they seek to enter the developed markets,” he says.
But given Citi’s full-service business model, rivals are quick to highlight the weak spots in its franchise, citing, for example, its need to beef up its investment banking presence in Russia, the fact that Credit Suisse dominates in Brazil, and Goldman Sachs, UBS and Morgan Stanley have made strong inroads in China. Citi’s peers reckon the bank is not as successful as Goldman in generating income from principal investments, while its structured product offering has historically proved wanting – although it has beefed up its capabilities in recent years.
Put simply, Citi does not dominate every product in every region. Other global banks might use their balance sheets more selectively while capitalizing upon client relationships with greater efficiency relative to the number of coverage bankers. However, Citi’s multi-product global investment banking capability is unrivalled – HSBC can’t yet match its prowess in equity capital market transactions, for example – while it cannily benefits from onshore liquidity. The second wave of the emerging market growth cycle – a projected boom in capital market financing as corporates alter the risk profile and maximize returns on structurally under-levered assets – should stand Citi in good stead given its commercial banking support to strategic clients, not to mention growing intra-emerging market investment flows.
