Awards for Excellence 2019
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Banks don’t come much more global than Citi. The US firm has a local presence in 98 countries and works with firms across the world.
Its corporate franchise is founded on helping multinational corporates expand globally, particularly into emerging markets, and on helping emerging-market companies grow beyond their home markets and regions.
This year, however, as global trade tensions continue to rise, some clients are adjusting their approach.
“A lot of multinationals are bringing decision-making out of country and into regions,” explains Carolyn Sheridan, COO of Citi's corporate bank. “So, we will align against that and try to replicate it.”
The emergence of new regional trading blocs has presented new opportunities for a bank that has a long history in so many countries.
The US bank is active in intra-Asian and east African trade, and has financed several key intra-regional deals in Latin America this year. It acted as exclusive financial adviser and lead financing structurer of Grupo Copetrol’s acquisition of Petrobras’ fuel distribution business in Paraguay and was joint lead arranger of Grupo Salud del Perú’s $110 million acquisition financing of Grupo las Americas in Medellín, Colombia, the company’s first investment outside Peru.
That doesn’t mean that Citi is not still front and centre in the large, global deals too. The bank represented Walt Disney in the $71.3 billion acquisition of 21st Century Fox that closed in March this year. It also represented the firm in its failed bid for BskyB, which was sold to Comcast in September.
Citi acted as financial adviser and corporate broker to Shire in its acquisition by Takeda Pharmaceutical, the second largest healthcare M&A transaction in history, the largest Japanese M&A transaction in history and the fourth largest cross-border transaction in history.
Disruptive technologies have, however, dominated the news agenda and the deal flow over the last year, and Citi was well-positioned to take advantage of this.
“Disruptors provide the backbone for economic growth,” says Manolo Falco, co-head of banking. “They want financing quickly and on a global basis. These companies do not have large treasury operations, so you need to have a different focus.
“It is not just a case of looking at whether they produce free cash flow or what their debt metrics are,” he explains.
“We are highly involved because we know the space so well. We understand the future value proposition of fintech and disruptors,” says Tyler Dickson, co-head of banking.
This involves taking a much broader view.
“For young, fast growth companies, you need to take an ecosystem approach,” says Falco. “This gives you a true insight into what the company is doing.”
“We developed a relationship with Alibaba in the early 1990s and have built up that relationship over time,” says Dickson. “We played a lead role on their NYSE IPO and more recently in Ant Financial’s pre-IPO equity issuance, which was one of the largest single private placements ever worldwide.”
We want to be able to finance every part of the cash conversion cycle. No one else can do this on such a global scale- Carolyn Sheridan
Banking the world’s corporates demands much more than lending.
“We do not lead with balance sheet,” explains Dickson. “We are very focused on the right transactions and how to mobilise our balance sheet.”
One of these was the acquisition by McDonald’s of AI personalization firm Dynamic Yield, on which Citi was exclusive financial adviser. This was Citi’s first completed M&A mandate for McDonald’s and the latter’s first company acquisition in over a decade.
The last 12 months have been a volatile period for corporates and markets, and banks will need to continue to be responsive to the environment in which its clients are operating.
“Trade will be disrupted, so we are working across the supply chain,” Sheridan says. “We want to be able to finance every part of the cash conversion cycle. No one else can do this on such a global scale.”
Citi’s strong transaction financing franchise has played a key role in its success in this category.
In the first quarter of this year, treasury and transaction service revenues at the bank rose 10% year on year, to $2.4 billion.
“Payments, FX and treasury are converging, and we aim to be leading in all three,” says Sheridan. “If we aren’t on one of those legs, then we will review the relationship. These are high-returning, scale businesses.”
Corporate FX has been a particular strength: last year, over 40% of Citi’s revenues in rates and currencies was generated from solutions extended to corporate clients. The bank provided a solution to automate FX fixing execution for the International Air Transport Association (IATA).
Citi’s Banking, Capital Markets and Advisory (BCMA) division has streamlined internal decision-making and enabled the firm to become nimbler in its approach to corporate clients.
“Before BCMA, we were closely related cousins. Now we are one happy family,” says Falco. “Internal discussions are much quicker. A recent large commitment took less than 48 hours and was on the table well before the client needed it. We wouldn’t have done that before.”