Citi gets set for growth in the Nordics

Where the Nordics lead, other regions often follow. The region has consistently punched above its weight when it comes to capital markets activity. For instance, Nordic initial public offerings (IPOs) accounted for 44% of all European IPOs by number of deals last year, according to FactSet, and have consistently accounted for about a third of activity over the past five years.

The region also has a strong track record when it comes to the issues topping the global financial agenda. Sustainability and social justice have long been at the heart of the region’s culture. Add to that its lively fintech and broader digital industries sector, and it is a highly attractive proposition for banks seeking to serve engaged and forward-looking corporates.

When asked to summarise what gives the Nordics its certain je ne sais quoi, Alex Stiris, Citi’s Nordic cluster head and co-head of banking, capital markets and advisory for the region, says: “It’s a very entrepreneurial environment. Its societies are set up in a way that enables people to take risks; people can afford to and it’s encouraged and acceptable to do so.” Combined with the region’s deep and well-established capital markets, Mr Stiris believes this gives its entrepreneurs the confidence that they will be able to access funding and grow their businesses.

Half-century track record

Citi has had a presence in the region since the 1970s, starting an office in Norway since 1973 and others following in Denmark, Sweden and Finland over the next four years. The bank now offers full capital markets, corporate and investment banking, treasury and trade solutions, securities services, markets and commercial bank capabilities in the Nordics. And Mr Stiris believes the best is yet to come for the bank’s activity in the region. On the investment banking side, he says it aims to maintain its position as one of the leading investment banks in the Nordics. In the past year, it has also announced the expansion of its commercial bank in the region and its custody business, including a referral agreement with Nordea to provide services to its customers.

Supporting global aspirations

Its sweet spot is serving clients that already have an international footprint and Nordic companies with global aspirations. Ambitious Nordic companies, by nature, have to be very outward looking. Mr Stiris believes. “The Nordics is a small market, accounting for around 25 million people, so it’s a very export-driven economy,” he says, adding that if a Nordic company is not already global, “they want to be global, because the reality is for corporates or fintechs to continue growing and be successful, they have to go global.”

In addition to its longstanding multinational clients, Mr Stiris says the bank has seen “pent-up demand” from two main segments with international ambitions. First, mid-market Nordic companies, who in the past perhaps wrongly assumed a bank such as Citi would only serve larger clients; and second, fast-growing technology driven businesses, such as fintechs, healthcare and life sciences companies. He believes Citi is in a unique position to offer such businesses a combination of its local banking presence and knowledge, as well as its global capabilities, as its main domestic competitors in the region are more locally focused.

With the expansion of the commercial bank, it is also proactively seeking to develop a relationship with clients earlier on in their growth lifecycle. “In the past, with some of these fast-growing companies, maybe we would only have provided equity capital markets (ECM) services, for example,” he says. “Now, we can provide them with a whole suite of Citi products and services, and it allows us to build up that trusted adviser relationship with those clients.”

Robust capital markets

Capital markets activity, both in ECM and debt capital markets (DCM) continues to be robust in the region, even as it slows elsewhere in Europe. Mr Stiris says: “The Nordics have had a very strong start in DCM this year, with activity up 34% year-on-year up to mid-April, compared with last year.” He expects the market conditions to remain strong, albeit perhaps not to the same levels as in the first quarter.

When Covid-19 hit, the region’s corporates, he believes, were generally well capitalised, as well as being able to take advantage of government support, so there was not as much of a rush to raise capital for liquidity purposes as in other parts of Europe. “The Nordic companies, because they didn’t feel they needed to rush to market, have been able to bide their time and take advantage of the attractive market conditions in the first quarter,” he notes.

Similarly, environmental, social and governance (ESG) considerations have been driving a lot of issuance activity, even when compared to the region’s own historically high volumes in this area. Sustainability has long been a focus in the region. Mr Stiris observes that Nordic governments, as well as corporates, have some of the most ambitious global targets around achieving carbon neutrality. At a society level, it is an area that has long been recognised as important. And at a product level, ESG-linked bond offerings in the first quarter of 2021 stood at 30% of all DCM issuance in the region, compared with 13% last year, including a big uplift in social bond issuance.

Growth phase

Broadly, Mr Stiris believes the bank is very much in a growth phase in the region, and is looking to make several hires — particularly within the commercial bank’s custody and clearing division — to enable that. “I think people sometimes find it surprising how much we’re growing in the Nordics across our businesses,” he says, “but there are a lot of growth of opportunities and we need to bring in new people to meet that demand.”

These areas of focus also correspond with Citi’s broader strategic thinking at a global level. Of the recent spinoff of Citi’s securities services division from its markets business, he says: “It really highlights the priority focus we have on security services as part of Citi’s strategy.”

In 2020, Citi expanded its direct custody and clearing services to include Finland, making it the only international bank with a fully pan-Nordic offering. With this slotting into its global position of offering custody services in 64 countries, “there is no other bank that [offers] that”, Mr Stiris says.

Due to regulatory changes, such as the incoming Target2-Securities framework in Europe, and economies of scale, custody is becoming an area of banking populated by big global players. Mr Stiris says that with Citi’s integrated global offering of these services, including the supporting technology, it is economical for it to be able to invest in this area and achieve strong returns. “It is difficult for some of our competitors who are not as global to get that return on investment and to provide that same level of service,” he says. This is where partnerships come in, such as the one agreed with Nordea in February — where Nordea is withdrawing its own offering and has recommended its sub-custody clients use Citi’s services for this area.

Future of work questions

Mr Stiris also believes addressing the questions that have been raised about the future of work culture as a result of the pandemic, and the need for mass home-working it prompted, will be a key part of the bank’s development going forward.  

He is complimentary of the approach Citi’s new chief executive, Jane Fraser, has taken towards staff wellbeing and working culture, citing initiatives such as “Zoom-free Fridays”, where there is a de facto ban on video calls for internal meetings on Fridays. “People may ask why that is so important,” Mr Stiris says, “but staff have taken this measure extremely well. It enables people to have a break from being in front of the camera and makes it possible for people to still have calls while perhaps also going out for a walk.” Staff mental health and wider wellbeing will continue to be a priority, he adds.

Meaningful discussions, he says, are also underway around the practicalities of how hybrid working can operate, marrying the benefits that both home and office working bring, and how the office workspace should be organised in the post-pandemic world. Here, he believes the Nordics have something of a head start. “Occasionally working from home was not unusual here before the pandemic, obviously not to the same extent as we have seen in the past year, but in terms of people being able to leave to pick up their kids and then logging on after doing that,” Mr Stiris says. “These kind of things were already a part of the culture.”

Ensuring working arrangements are created which serve staff, clients and the bank well for the future — the so-called “future of work” question — is “one of the most significant themes to address”, Mr Stiris believes. He adds: “Of course, what is happening in the markets, the volume of activity around IPOs or DCM issuance, or other areas, is important; but, ultimately, these things go up and down, whereas answering these bigger questions is vital for the long-term success of the bank, and for the industry more widely.”