No-one doubts the success of the fixed-income department at Salomon Smith Barney. Since the merger first of Salomon Brothers with Travelers' brokerage house Smith Barney in 1997, and then Travelers itself with Citibank in 1998, the fixed-income group has risen up the bond league tables and made a lot of money in the process.
A greater focus on client relationships at the expense of proprietary trading after the first merger, and a wider base of clients around the world and a balance sheet to boot, after the second, have been two major contributing factors.
But Salomon has also played a deft hand in innovation, as last year's mini-Trups (pronounced troops) structure proves. Trups stands for tier one-qualifying capital securities (the acronym is a bit of a stretch), a collateralized debt obligation, and in itself is nothing new; banks have been launching CDOs and CLOs (collateralized loan obligations) since 1996. But these securities are only economically beneficial to larger banks. Smaller banks find it much more difficult, whether because of legal costs, other set-up costs such as securing a separate credit rating for the securities, or simply because of the premium demanded by investors when investing in small and therefore illiquid securities.