Best emerging markets investment bank:
Citi
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Also shortlisted: |
It has been a mixed year for emerging market investment banking, given disappointing activity in key markets such as Russia, Brazil and Nigeria, and modest appetite for FX and credit products, amid rate volatility and the abrupt strengthening of the dollar in local-currency terms. As ever, investment banks with cross-product capabilities, from flow to events-driven business, have managed to weather the deal-flow cycles.
Meanwhile, the return of Asian equity capital markets, global M&A deals, and the continued health of primary debt markets, albeit a low-margin business, have boosted emerging market investment banks’ origination earnings.
Citi still commands the industry-leading markets and origination business, backed by its global corporate banking franchise. As Basel III and balance-sheet retrenchment challenge the economics of multi-currency payment facilities, secondary support for low-margin credit and equity underwriting business, and long-dated swaps and rates products, Citi has notably held firm in its cross-border local rates, credit and origination business.
Its full suite of commercial and investment-banking products, the longevity of its local presence for institutional accounts, and balance- sheet support for strategic clients continues to pay off. Two-thirds of the net income from Citi’s Institutional Clients Group (ICG) originates from outside North America, vastly more than any other US bank, and around 40% of revenues come from emerging markets. In the first quarter of 2015, 44% of Citi’s corporate loan book was in emerging markets, representing $115 billion.
Citi remains the most consistent investment-banking leader in emerging markets, advising on the most strategic and cross-border transactions in any given year, across products. Over the awards period, for emerging markets, it has been number two in bonds, number three in equities and top in M&A according to Dealogic.
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We embarked on the process of bringing down divisional silos from 2008
Mark Slaughter, |
Citi is the leading CEE equity and debt house; it stayed committed to its Russian business, acting as sole adviser to Petrocas Energy on the sale of a 49% stake to Rosneft in December, for example. It dominated Middle East M&A, based on regional variety and big-ticket deals, such as the $2.6 billion purchase of Economic Zones World by DP World from Port and Free Zone World in Dubai. In Africa, Citi arranged debut Eurobonds for the Côte d’Ivoire and Diamond Bank, advised on landmark privatizations in Nigeria and dominated African equities.
In Latin America, Citi is still a top-ranking player across international and local bonds, syndicated loans, ECM and M&A. Meanwhile, in Asia it raised close to $200 billion for clients from international capital markets and advised on $100 billion of Asian M&A, both inbound and outbound, from deals focused on Chinese internationalization to financials.
What’s more, it provided $50 billion of loans to key Asian clients, including Sinopec, Alibaba and Reliance Industries. Indeed, its key focus over the last year has been deepening relationships with a targeted client base. In Asia, its commercial and investment banking divisions now bank 95% of the Fortune 500. Citi has set up 20 Asia desks to support Asian corporates globally. For example, for Samsung alone, it provides banking services in 60 countries globally.
It is also reaping the benefits of integrating its array of wholesale and events-driven units. “We benefit from our unique position as a truly global bank with both a strong corporate and investment banking franchise,” says Mark Slaughter, Asia-Pacific head of corporate and investment banking at Citi. “We embarked on the process of bringing down divisional silos from 2008. Some European banks have only recently addressed the challenge of ensuring they are truly client-centric and have integrated their corporate and investment-banking capabilities.”
Strategic exposure
In addition, Citi, like its peers, is focusing on less asset- and capital-intensive businesses, and has sought to align cash-management and FX more closely to maximise the wallet-share of its clients. After pulling out of low-returning retail units in select emerging markets, Citi remains strategically exposed to high-growth markets.
Slaughter is keen to point out that Citi acted as financial adviser in Malaysia’s Sime Darby’s $1.74 billion offer in October to buy New Britain Palm Oil in Papua New Guinea. Citi’s advisory role in this niche deal underscores the pride every Citi banker holds – and the industry acclaims – for the bank’s astonishing reach, with a corporate-banking presence in 101 countries, which, thanks to regulation, is unlikely to be matched.
Manolo Falco, Citi’s head of corporate and investment banking for EMEA, says: “In the CEEMEA region, the combination of volatility in Russia, Turkey and Nigeria, and weak oil prices and a strong dollar, have made things difficult. M&A, for example, has been much lower than we expected. All in all, however, we have suffered less than other firms – pure-play investment banks, especially – because we have a versatile business model, and a leading markets business, which has allowed us to maintain and even selectively invest in further local presence in key markets.
“As an example, we have maintained our commitment to our local Russian corporate and investment banking franchise and we are starting to see action pick up. Volatility in local rates has helped our FX and cash-management divisions and we have grown our exposure to some of the largest companies in the Middle East and Africa.”
