Citigroup aligns emerging markets with fixed income
Citigroup has formed a new global business group called Fixed Income, Currencies & Commodities (FICC). It combines the firm’s fixed-income business with the emerging market sales and trading operation.
In an internal release sent to employees this week, Tom Maheras, global head of capital markets, promoted the reorganization as “a natural evolution toward providing an integrated global platform best positioned to serve our clients”.
The truth, however, is that this finally removes one of the vestigial standalone Citibank entities. Ever since Citibank took over Salomon Brothers there has been a separation between the old Citibank emerging markets business and the rest of the firm. This had built up organically and is highly successful. Its chief for the past two years, Paco Ybarra, reported separately to Maharas alongside co-heads of fixed income Geoff Coley and Randy Barker.
No other bank has branches with treasury operations in more than 100 countries. Citi’s senior management will claim that they have done a reasonable job of putting it all together. But the fact that emerging markets has finally been folded into the wider organization suggests that those efforts have not been entirely successful. Conceptual arguments about what is or is not emerging markets get in the way of having an integrated business.
“What is more important is the stuff that happens next. How they actually get put together,” says a Citigroup banker. “I’m not sure if this is really another reorganization; this is just an alignment of businesses. The real reorganization happens later.” says another Citi banker.
If the reorganization is properly managed, Citigroup will be able finally to catch up in such areas as commodities and punch its weight in local currencies (both FX and debt) against competitors that do not have its natural competitive advantage of sheer scale, yet have outperformed it. Firms such as Goldman Sachs in commodities spring to mind.
There are now three heads of the new group called FICC. Randy Barker, Geoffrey Coley and Paco Ybarra will have responsibility for FICC in its entirety and continue to report to Maheras.
There will be a division of labour between the three heads. Barker will continue to look at credit, origination and securitization. Coley and Ybarra will jointly run rates, currencies and commodities.
Given the amount of noise that has been made lately about Citi’s high costs, this move could be a prelude to an eradication of some of the duplication that has long been mentioned as a problem at the bank.
The key question of how the senior management pulls together local business alongside G7 – from a customer and product perspective – is the one that needs to be answered. If they get the answer right the big benefit should be the creation of a credit business that doesn’t even exist yet. As these countries continue to grow and a lot more capital markets origination takes place, Citi should be very well positioned.