Two pieces of news competed for least surprising financial services headline this week, although it is a fair bet that one got more attention than the other. Top billing went to the fraud and market manipulation conviction for Bill Hwang, former owner of Archegos Capital Management.
But equally predictable was the somewhat less flashy news that Tyler Dickson was leaving Citi and heading to Blackstone, where he will be global head of client relations. And because I have interviewed Dickson fairly regularly over the last 25 years or so – during which he consistently proved the need for the half-speed setting on first my Dictaphone and more recently my voice memos app – that was the headline I was more interested in.
Dickson has had a fine – and long! – career at Citi. He started in M&A at Salomon Brothers back in 1989, and before his most recent role of head of investment banking, he had arguably had a bigger post when he was co-heading what was a pretty successful banking, capital markets & advisory business with Manolo Falcó and reporting to Jamie Forese.
But the reality is that his position at the bank had looked untenable ever since the bank’s CEO, Jane Fraser, shook up the structure of the institutional clients group division that Paco Ybarra used to run, breaking it up into its constituent parts last year.
The move created a services division comprising securities services and the transaction-banking franchise, a markets division with equities and fixed income, and a banking unit with classic investment banking and corporate lending.
It swept away a lot of the old constructs, and with it some of Dickson’s apparent clout. And while Fraser could have taken the opportunity to have Dickson run the new division – elevating him to the inner circle of business leaders reporting directly to her – she didn’t, preferring to lure Viswas Raghavan over from JPMorgan.
It didn’t help that Citi’s investment banking business has not exactly hit it out of the park in recent times, even allowing for the shoddy market backdrop. Since the special purpose acquisition company (Spac) IPO bubble burst back in 2022 – a business that Citi had pretty much made its own – things have started to look a little bleaker over in Citi’s Greenwich Street HQ.
Fixing that is now the number one priority of Raghavan, Citi’s new arrival this year as the hard-charging head of banking and a JPMorgan veteran whom I first encountered when he was merely running that bank’s convertible bonds desk in London after joining in 2000. With the very best will in the world, the idea that Raghavan and Dickson might last long in the same building never looked likely.
Blackstone is a super-interesting place to be right now, particularly BXCI
But as much as Raghavan’s jump to Citi was a great move for him – particularly as it gives him a lot more scope to rise further than he was likely to have any time soon at JPMorgan – the move to Blackstone looks good for Dickson too.
He has pedigree at Blackstone even before he starts, having led the company’s IPO in 2007. His role – the newly created head of client relations for the firm’s credit and insurance group, BXCI – is nebulous enough to let him define it.
It also looks like a lot less hassle than running a now second-tier business at a bank that still has an awful lot of noise surrounding it while reporting to someone with a reputation for being uncompromising (something that Raghavan would take as an enormous compliment).
Blackstone is also a super-interesting place to be right now, particularly BXCI. Dickson has noted how fast it is growing as it captures opportunities in private credit – it is in fact the fastest-growing bit of Blackstone, doubling its assets under management to $330 billion in the last three years.
Blackstone wants Dickson to be a critical part of the effort to create a 'one-stop solution’ for clients. Coming from Citi, the original financial supermarket, he is certainly familiar with that.
FICC concentration
A Bloomberg report that Citadel Securities is mulling a white-label service offering to big banks’ trading divisions, where it would handle trading operations while the banks focused on their client relationships, is an intriguing development in the fascinating dynamic that exists in these businesses at the moment.
I’ve spent the last few weeks speaking to some of the big trading franchises on the Street as part of our annual Euromoney Awards for Excellence process. It is clearer than ever that the markets businesses of fixed income, currencies and commodities (FICC) and equities are more concentrated than ever among the very biggest US firms.
No one else really gets a look in these days. The big five typically account for more than 70% of the total revenues of the big 12 – leaving the Europeans with the scraps, or niche specialisms, such as Deutsche Bank in credit, the French in equity derivatives, or HSBC with corporates.
There are two problems with this picture, even though the thrust of it is broadly right. One, it ignores the fact that even for the big US banks, supporting trading businesses is becoming more and more onerous in terms of capital regulations.
It seems hard to imagine the banks at the very top of the markets tree giving up control of the whole life cycle, even if they are under more regulatory capital pressure
That is why every desk on the Street is falling over itself to tell you how integrated they are with the rest of the institution, offering something that is holistic and client-centric and solutions-driven and product-agnostic, etc, etc... because the days when these monsters could support themselves and the rest of the firm (think pre-crisis Deutsche) are fading fast, even in the US.
And two, it ignores the fact that an increasingly big chunk of the business is gravitating to non-banks like Jane Street and Citadel Securities, It is not known exactly how much, of course, because these firms are private, but the leak of Jane Street financials to the Financial Times back in April gave a few pointers.
Jane Street notched up $10.5 billion in trading revenues in 2023, putting it behind the big five US firms (Morgan Stanley and Bank of America are the closest, with about $17.6 billion each). But it is comfortably bigger than any of the European franchises – Barclays is the biggest of those, with about $9 billion of annual markets revenues.
And in equities its position is growing fast – about 10.4% of North American equity trading in 2023, according to the information the FT got hold of. And Citadel Securities publicly claims about 23% of US equity trading.
It seems hard to imagine the banks at the very top of the markets tree – Goldman Sachs and Morgan Stanley in equities, JPMorgan and Citi in fixed income, with Bank of America a rapidly improving competitor in both – giving up control of the whole life cycle, even if they are under more regulatory capital pressure.
But below them, who knows? Deutsche obviously shut down practically all its equities franchise back in 2019, finally conceding that it had basically lost the technology war and was seeing less and less marginal benefit in trying to have its own business at all.
The others muddle on – the likes of Barclays, BNP Paribas, UBS and HSBC. But ever since Deutsche took its drastic step, the pressure has been on all of them to justify their businesses. So far, no one else has blinked. An offering like Citadel’s could change the picture fast.
Citadel Securities recently hired markets veteran Jim Esposito, another fine banker who bowed out of Goldman at the end of 2023 after feeling he had started “merely going through the motions” (see his LinkedIn post) and didn’t like that feeling. He starts on August 30: if Citadel’s new plan is anything go by, he won’t have that problem there.
