World's best investment bank 2018: Citi

The rationale behind Citi’s nomination as the world’s best investment bank this year is simple, but impressive. In every part of world that Euromoney considered the credentials of the leading regional investment banks – North America, Latin America, western Europe, central and eastern Europe, the Middle East, Africa and Asia – Citi was a genuine contender.

In almost all of those regions it had a realistic claim to be the best bank for financing. And, just to cement its global-regional-local capabilities, Citi was also worthy of serious consideration for each region’s best bank for transaction services.

These arguments speak to two incontrovertible facts about Citi’s Institutional Clients Group (ICG) today: no other firm comes close to the scale and breadth of Citi’s wholesale banking operations; and Citi hasn’t just built and maintained a global network, it has built one that works and is increasingly valued by its clients, who view Citi as a true partner to their own global businesses. And this, remember, is the network that most competitors said was too big to manage effectively.

Clients like Citi’s consistency as well as its ubiquity. Citi’s management is keenly aware of the risks of trying to leverage its network too hard.

“If you look across the globe, we are not number one in everything,” says Jamie Forese, Citigroup’s president and head of the ICG. “We don’t need to be spectacular or to always beat our peers. But we contend in everything we do, and we contend in more areas than our competitors.”

Look at the overall numbers. Citi’s ICG unit – divided into a banking division, of which the main constituent parts are transaction and trade services (TTS) and investment banking, and a markets and securities services group – delivered revenues of $35.6 billion in 2017, up 7% on the previous year. TTS was up 7% and investment banking up 14%. The momentum continued into the first quarter of 2018, posting an overall year-on-year jump of 4% in revenues and 11% in adjusted net income.

Forese’s disciplined approach is one of the reasons why Citi can deliver a cost-to-income ratio of 55% in ICG, lower than the equivalent at many of the firm’s peers, despite the extent of the network that has to be maintained.

The same applies to technology. Citi has to spend to keep its advantages in business lines such as markets and TTS, but it is rigorous in making sure that spending equates to an improvement in service for clients.

Next, look at the regional businesses. Citi is a clear winner of the award for central and eastern Europe’s best investment bank this year. As the last remaining global bank with a franchise across the region, it is likely to be the favourite every year. But, again, it is not about the existence of the network, it is about making that network work for the firm and its clients. Citi led 14 new equity capital raises, eight of them IPOs and in four jurisdictions. In M&A, it benefited from close local relationships to lead deals that other international firms would not, or could not, touch.

In the Middle East, where it also scoops the regional investment banking award, Citi was top three across debt, equity and M&A, active on the big regional transactions as well as more esoteric and niche fundraises. Citi is back in Saudi too, with a new capital markets licence and a lead role on the kingdom’s sovereign sukuk to cement its return.

In Asia, the Euromoney award goes to Citi’s overall banking business, but the investment bank played a key role in the success. Citi has long been a leader in the region’s markets and transaction services sectors, as well as a force in capital markets. In the past, investment banking – particularly in China – has been seen as a relative weak point, but competitors say Citi is the house that saw the clearest improvement during Euromoney’s review period.

In financing globally, Citi excelled during the awards period, topping the Dealogic global debt capital markets league tables and the global rankings in IPOs – the first time it has achieved the latter since 2002. Its markets business steamed ahead, building on its traditional strength in fixed income – in which it remains the global leader – while boosting its equities franchise, posting a remarkable 38% jump in year-on-year revenues in the first quarter of 2018. TTS remains the business that holds so much together, as well as being a powerhouse in its own right, delivering revenues of $8.4 billion in 2017, almost $3 billion ahead of investment banking.

The last 12 months have been a hugely important period for Citigroup as a whole. An investor day in October 2017 was cathartic, during which chief executive Mike Corbat said the firm had passed an inflection point since the financial crisis, which hit the bank so hard.

Competitors are now catching on that Citi has something they don’t. Clients realized this a lot earlier.