Citi intensifies focus on Asia-Pacific

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Citi is stepping up a multi-year plan to simplify and better target key investment banking services to clients, promoting two Australia-based bankers to broader roles covering Asia.

Amid ever-tightening links with the fast-growing Asia region, Citi Australia last month promoted head of Australian Dollar syndicate, James Arnold, to lead a consolidated Asia-Pacific team responsible for regional local ­currency markets.

Sydney-based head of equity syndication, Rob Jahrling, will also take on a broader regional role to win more so-called “block trades”, deals where investment banks sell large holdings in stocks for clients.

“What we’re doing is taking expertise we’ve built up in Australia and regionalising that and we’re hopeful that’s going to offer a simplified offering,” John McLean, head of capital markets origination for Citi in Australia, told The Australian. “So (for example) James will have one meeting with an important corporate in the US but be able to talk about opportunities to raise capital in local currencies across the region …(and) there are some parallels on the equity capital markets side what we’re doing with Rob. To my knowledge, that’s unique.”

Mr McLean said it marked the next phase of a plan put in place in 2009, when the bank created one client-facing unit offering all capital markets solutions, from debt products to hybrids and equity.

He said the structure allowed greater flexibility to allocate ­resources in line with clients’ ­demands and gave junior bankers broad skills to avoid becoming “old leopards who can’t change their spots”.

Citi, which has been gradually growing its investment bank in ­recent years under chief Tony ­Osmond, was being encouraged by clients to make interactions “as simple as possible” and be rewarded with work for doing so, Mr McLean said.

Last year, Citi won the fifth most work advising on announced mergers and acquisitions, and the same position for debt issued by Australian companies, according to Thomson Reuters. The bank was ranked sixth for equity capital markets deals, such as floats and capital raisings.

The broadening of roles to ­include Asia comes amid a boom in infrastructure M&A, headlined by bumper government privatisations that are set to this year again dominate deal flow.

Mr Arnold said Citi — co-­adviser to Brookfield on its takeover play for Asciano — was heavily focused on the infrastructure sector, given the bond ­market’s key role in financing M&A transactions when banks that have initially provided funding look to offload their positions into the capital markets.

He said the Australian bond market was becoming an increasingly viable pool of capital, including compared to several deep markets in the US.

Citi was last year involved in raising 10-year debt for Asciano, which Mr Arnold said was encouraging as it showed the funding terms available were lengthening. Initiatives like the introduction of a 20-year bond futures contract were also helping.

Mr McLean said he wouldn’t initially be hiring new bankers to support Mr Arnold’s new role, but noted there was a “mandate to grow”.

“We’ve got to hit our numbers and prove the Australian market will continue to provide opportunities,” he said.

“It certainly did last year: 2015 was a landmark year for Australia in the context of our regional business; we were a big contributor to the region’s outcomes and so that puts us in a strong position.”

Mr Arnold said debt issuance in Australia by companies would be about this same as last year, which sank to $US157.9bn, the lowest level since 2011, according to Dealogic.

But the year was peppered with some landmark deals such as Apple’s $2.25bn deal, a record for a non-financial company that was swamped with demand.

“I think the demand for Aussie dollars globally will remain relatively strong; we are still a high-yielding currency,” Mr Arnold said, pointing to near zero interest rates in Europe and the US.

“(Also) We are seeing much more Aussie dollar investment coming out of the Asian region.”

In December, Citi helped Ford raise $500m in three-year debt, the US giant’s first Australian ­dollar transaction in more than 12-years that Mr Arnold said was gobbled up largely by Asian ­investors.

“There’s actually a number of investors at the moment who are increasingly comfortable with Aussie being in the low US70c level,” he noted.

“For a period there was a view it was possibly overvalued and they were perhaps slightly reticent to invest in Aussie dollars, fearful that the currency could fall. Now that we’ve actually seen that pullback over the course of the last 18 months … what we are finding is that people are more willing to put their (dollars) to work in bond transactions.”

Mr McLean added that the ­recent uptick in concerns about the global outlook, led by ructions in China’s foreign exchange and equity markets, could actually benefit Australia as it became ­relatively appealing.

Mr Arnold, however, said global companies wanted a diversified investor to complement their largest funding currencies of US dollars, euros and yen, and being able to offer the region’s suite of transactions to clients through a centralised sales desk would be beneficial.

In Australia, he said issuers were increasingly eyeing the ­Chinese market and issuing debt in renminbi, or CNH, particularly companies with some operations there. ANZ Bank and the NSW government issued CNH debt last year.

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