Citi, one of the largest investment banks operating in the country, does not plan to reduce its local presence despite outlining plans at the weekend to cut 20,000 jobs from its operations globally as part of a major cost-cutting exercise.
It has been a difficult year for the New York-headquartered firm, with investment banking fees in Australia falling 23 per cent last year, to $US72.6 million ($109 million), according to data compiled by LSEG, formerly Refinitiv.
Sources close to the bank, who spoke on condition of anonymity as they were not authorised to comment publicly, said Citi had no plans to pull back its services in Australia, and developing the local banking and markets business was part of its strategy.
Citibank announced big job cuts in the US on Friday.
There would be minimal jobs lost in Australia, those sources said. A Citi spokeswoman declined to comment on the specifics of the job cuts, but said Australia was “an important market [for the bank] and we will continue to grow and invest in the business”.
In November, The Australian Financial Review reported that Citi had reorganised its regional leadership. Its country head, Mark Woodruff, now reports to Hong Kong-based Angel Ng, who oversees the bank’s North Asian and Australian group.
The Australian and New Zealand business, which employs about 900 people, is part of Citi’s banking and international organisation. Some local back office jobs have already been terminated when the bank laid off employees late last year.
The changes at Citi are the latest upheaval in Australia’s investment banking industry. Credit Suisse, a long-time presence, no longer exists as its own business after being acquired by UBS, and many of its most senior staff have left for rivals, including its head of investment banking, Dragi Ristevski, who is now at Macquarie.
Another European major, Deutsche Bank, is considering returning to local deal making after largely exiting the market in 2019. It once had one of the biggest advisory businesses, assisting the NSW government on its $US7.4 billion sale of TransGrid and Santos on a $2.5 billion rights issue, both in 2015.
Citi, headed by chief executive Jane Fraser, announced plans for the job cuts, some 10 per cent of the company’s staff, as North American investment banks began conveying bonuses awarded to their employees. Locally, wealth managers and traders across fixed-income products will pocket healthier bonuses than investment bankers in corporate advisory and capital markets.
Most bankers in mergers and acquisitions saw their bonus payments fall up to 20 per cent from last year, while those underwriting equity offerings saw between 5 and 10 per cent dips in variable compensation, four people said.
“At the global banks, even bankers in smaller geographies are impacted by how the overall firm performs,” said Christopher Connors, a principal at compensation consultants Johnson Associates.
“When determining individual bonuses for senior bankers, myriad factors are taken into account, including firm performance, business unit performance, individual performance and market levels.”
Dealmaking was hampered by stubborn inflation and higher financing costs, which contributed to a global slump in transactions. Given the worldwide glut in M&A and initial public offerings, Australia-based bankers will share from a shallower bonus pool, dictated by results in North America and Europe, the people said.
Citi’s most senior local bankers, Alex Cartel and Mark Woodruff. The local bank is not expecting major changes. Oscar Colman
Wall Street’s largest institutions typically set the scene for the year’s bonuses as their fourth quarter earnings outline how much they have allocated on expenses, and provide a benchmark for others to follow.
Morgan Stanley notified bankers last Wednesday of their bonuses, JPMorgan will inform its staff on Tuesday, Goldman Sachs and Citi will communicate bonuses next week, while Bank of America will do so in late January. European banks, including UBS and Barclays, typically inform staff of their bonuses in February.
Credit and fixed-income traders, however, hoped their bonuses would spike up to 5 per cent, after traders capitalised on more Australasian bond deals, which increased 5 per cent to $US222 billion ($332 billion) last year. Unlike investment banking, much of Australian credit trading is conducted by local banks such as Westpac and ANZ, which compete with Barrenjoey and Deutsche Bank, among others.
Citi, outlining its fourth quarter results, said its fixed-income traders had their worst performance in five years as its global rates and currencies business was hurt by lower client activity towards the end of the year.
Johnson Associates estimated that bonuses for banks’ equities sales and trading teams would fall up to 10 per cent on average, while fixed income was predicted to be flat-to-5 per cent higher than last year. “Bonus pools in advisory will be hit the hardest as M&A deal volume hit fresh lows after a lacklustre 2022,” Mr Connors said.
Locally, the brightest spot for bonuses has been wealth management, which saw remarkable change last year with Credit Suisse’s demise and greater appetite for advisory work from the likes of Morgan Stanley, Goldman Sachs, HSBC, LGT Crestone and, after integrating Credit Suisse in Australia, UBS.
Advisers working with family offices and rich individuals have raked in greater revenue thanks to client demand for alternative investments like private credit, people said.
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