M&A strong though Chinese buyers lacking: Citigroup's Kalvaria

(Reuters) - Geopolitical uncertainties are not deterring Citigroup Inc clients from strategic deals and some unicorns’ offer “great potential”, but outbound Chinese buyers are lacking, Leon Kalvaria, chairman of the lender’s institutional clients group said.

FILE PHOTO: Leon Kalvaria, Chairman, Institutional Clients Group, Citi, speaks at the Milken Institute 21st Global Conference in Beverly Hills, California, U.S. May 1, 2018. REUTERS/Mike Blake/File Photo

Kalvaria also told the Reuters Global Markets Forum on Thursday that Citi’s overall market share across advisory, syndicate lending, equity and debt origination rose in 2019, but attracting and retaining talent is challenging in the business.

Below are excerpts from the chat, held on the sidelines of the World Economic Forum’s annual meeting in Davos, Switzerland:

Question (Q) - Is geopolitical uncertainty keeping some corporate clients, who would otherwise be looking for deals or other financing, on the sidelines?

Answer (A) - I don’t think geopolitical uncertainties are affecting clients who are looking to do strategic transactions. However, that said, obviously outbound mergers and acquisitions (M&A) from China has gone down considerably, but other cross border M&A remains reasonably strong.

Q - Many of Citigroup’s competitors are going down market to look for growth since there is more competition for the biggest deals but fewer of them. Why hasn’t Citi followed suit?

A - We are not going down market because we do not believe that’s the right phraseology. What we are doing is spending significant time on smaller emerging growth companies, which we believe, over time, will be winners within their sub-sectors.

Those companies are candidates for initial public offerings, merger and acquisition (M&A) opportunities and other potential services that we can bring to bear as they grow globally.

Q - How has the era of “unicorns” changed the way Citigroup sources new clients?

A - The era of unicorns relates to the earlier question about covering smaller companies. The unicorn valuations help highlight companies with great potential for us to cover and are very helpful in the areas we should invest in from the people standpoint.

Q - In 2018, Citi’s overall market share across advisory, syndicate lending and equity and debt origination rose to 5.1%, from 4.9%. How is the effort to capture more market share progressing and what are the biggest hurdles?

A - We continue to increase market share in 2019 slowly and carefully. The hurdles remain in retaining and attracting the best talent. This is a people business and we have to ensure that we have the best.

Q - How will the corporate banking landscape change, given recent consolidation in the capital markets industry. Will fewer players in equity or debt impact the other corporate banking business lines?

A - Corporate banking business will remain a broad global business. Obviously the big 3 American corporate banks continue to enjoy a very strong position in the marketplace and remain very strong. But they (face) competition from leading banks in Asia and Europe.

In terms of fixed income and equities, some players have retreated to some extent and that has given other players the opportunity to pick up market share.

(This interview was conducted in the Reuters Global Markets Forum, a chat room hosted on the Eikon platform. Sign up here to join GMF: )

Reporting by Divya Chowdhury in Davos, Savio Shetty in Mumbai, Aaron Saldanha in Bengaluru, Additional reporting by Imani Moise in New York