What shone through was the robust performance of transaction services which saw fourth quarter revenues up 21 per cent and net income by 37 per cent.
“The securities and fund services business have done well, although the markets favoured not just us but our competitors too,” said Neeraj Sahai modestly. He is the global head of securities and fund services, which together with cash management and trade services and finance constitute global transaction services, a business unit of Citigroup corporate and investment banking.
He paused. “But it’s also the strategy we’ve adopted to being a provider of complex solutions to complex and changing needs on a global basis.”
Enigmatic perhaps, but when he discusses where securities services and his other divisions are stationing themselves in the marketplace, it’s with feet firmly planted and looking to its strengths – integrated systems and global reach.
While Citigroup has always drifted around mid-league in the top ten securities servicing surveys, it has kept a quieter media profile than many of its rivals and something of a reputation of not thinking big enough.
But the figures show it must be doing something right. Those elements that fall under the umbrella of transaction services – security lending, cash management, trade servicing and custody – saw revenues grow at 28 per cent with assets under custody up 21 per cent.
Mr Sahai is coy on specific figures for how fast assets under management grew but in comparison with its peers he says research indicates Citigroup was among the top two performers. “All information leads me to believe we had industry leading performance.”
He agrees that being able to handle alternative investments was a critical element to success last year. “It has been challenging and not just because of hedge fund managers but also traditional long-only managers use of derivatives.”
And while he agrees that capital market presence, size and access to experience all played a part, it was the groups’ ability to integrate technology that was the winning formula.
“The classic lift-out model no longer works,” he said starkly. “Customised solutions are required, global scale products but with which you can plug and play.” He reeled off a number of solutions that offer a way to integrate services for prime brokers, hedge fund mangers, pension fund administrators and asset managers.
These markets, all of them, are the way to the second line of success: globalised reach and solutions that can be pruned down for each one’s need. Almost evangelically he calls it ‘”Globalisation 2.0”. In truth it is something other firms have noted.
Asset managers are considering their core businesses, outsourcing middle and back-office functions. The logical progression is that they will want to expand their markets internationally and will look for solutions they are both familiar with and are based on flexibility.
At the same time outsourcing will continue as with the ?40bn deal with Aegon in the Netherlands for its back and middle office activities. The contract struck concluded in 2005 encompasses custody, fund administration, transition management, post-trade compliance functions, securities lending and fund accounting.
But Mr Sahai is keen to emphasise the difference between global reach and large wallets, between commoditised solutions and flexible ones.
On the issue of how Citigroup will respond to the merger of Bank of New York and Mellon Financial Corporation, He tends to remain ‘on message’, not least because they are also clients. And that’s that he can see benefits for both parties but it won’t be a problem.
The “big is not enough” message could apply to BNY Mellon and on the importance of a global presence a wry observer once commented that ‘Mellon is no more global than Bank of New York’, fair enough when looking their geographic spread of their income compared with State Street or Citigroup.
GoK
