Michael Klein, CEO of global banking at Citigroup, tells Brian Caplen that gaining corporate client trust requires the bank’s senior advisers to position themselves as peers of the CEOs and boards with which they deal.

The CEO of a large corporation holds the position for an average of five years. In that time there may only be two or three transformational decisions taken. The aim of the Citigroup investment banker is to occupy a seat across the table from the CEO, to be a strategic adviser on a peer-to-peer basis, and to be involved in those big decisions.

Five years ago that meant talking on an equal footing about the impact on business of fibre optics or the internet. Today the dialogue is more likely to be about oil and commodity prices, currency and interest rate fluctuations, competition from emerging markets and strategy for China and India.

“Our most senior advisers, our best investment bankers, have to be viewed as peers of the CEOs and boards that they deal with because their role is to provide trusted advice,” says Michael Klein, chief executive of global banking at Citigroup.

“The idea is to be positioned within our clients’ offices at board level, as an adviser thinking about the issues that they [the clients] are concerned about, looking at what’s really driving their business. With the largest companies, you cannot go in there just to propose the latest swap or the latest financial structure or even a small acquisition. That’s not a dialogue that is being handled at that level.”

Power advisers

To give its senior bankers the resources they need to operate at board level, Mr Klein’s global banking division has set up an economic and political strategies unit. The unit is advised by former US treasury secretary Robert Rubin, who is a director and chairman of Citi’s executive committee, and led by Jeff Shafer, vice-chairman and a former US treasury undersecretary.

Another resource is the financial strategy group (FSG) strategy group that provides corporate finance advice.

“The FSG helped us to create an original view on cross-border M&A and has recently looked at the role of hedge funds and their impact on corporations,” says Mr Klein.

Of the $25bn in revenues produced by Citi’s Corporate and Investment Banking (CIB), roughly 60% or $14bn is being made by global banking. Global banking is growing at 10% a year and, as Mr Klein points out, 10% of $14bn is a lot of money.

Made-to-measure guidance

Global banking involves providing tailored advice to companies, financial institutions and governments worldwide. This includes advice on acquisitions, restructurings, loans, foreign exchange, cash management, underwriting and distribution of debt, equity and derivatives. The other divisions in CIB are global markets and transaction services.

Mr Klein has headed up global banking since February 2004 and has worked in what has now become the Citi family of companies for 20 years. His first job was in Salomon Brothers’ M&A business in New York.

Mr Klein says that the global banking function resembles a traditional investment bank containing all of the front-end relationships. It brings together the Salomon and Schroders investment banks with Citi’s corporate bank. The new structure was put in place by CIB boss Robert Druskin two years ago.

It involves the high level relationship at the top and the total relationship then flows down both through the client and Citi. “Our top clients are generating tens of millions of dollars in fees per year and, typically, there are 20 to 30 Citi bankers around the globe interacting with them,” says Mr Klein.

Filling in the gaps

Does Citi have all the products these big clients will need? Critics point to gaps, such as credit and equity derivatives.

Mr Klein says: “We aim to be best in class in all our products. To achieve this we are still filling in in certain geographies and products.

“We are growing our derivatives business and fixed income. We have very robust credit derivatives and interest rate businesses. We’ve built these by hiring, by training and by mindset.”

The end result is a model that, according to Mr Klein, “is purpose built for the current environment”. He says: “The model is structured around being global, having scale, ranking with the clients as a critical needs provider and then providing best in class ideas, services and execution.”

CAREER HISTORY:

2004: CEO, Global Banking

2003: CEO, Global Corporate and Investment Bank, EMEA

2000: CEO of the Citigroup Corporate and Investment Bank, Europe and co-head of Global Investment Banking

1998: Head of Global Investment Banking, Europe

1994: Co-head of Financial Entrepreneurs and Private Equity Group

1988: Head of Financial Sponsor and Transaction Development Group

1985: Joined M&A group after graduating cum laude from Wharton Business School

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