The Band Reunites: Citigroup's High-Risk Strategy to Revive Its Investment Bank

The Financial Times reported that Citigroup's new global head of banking, Viswas Raghavan, has hired at least 10 ex-JPMorgan colleagues as part of his turnaround plans for the bank's investment arm. This move is reminiscent of the plot from the 1980 film The Blues Brothers, where Jake and Elwood reunite their old R&B band to save an orphanage. However, in the world of investment banking, hiring former colleagues can have mixed results, with some banks experiencing success while others, like Deutsche Bank and HSBC, have struggled to gain significant market share.

Key Takeaways:

• Hiring star leaders and letting them bring their own team can have mixed results, with some banks experiencing success while others struggle to gain market share.
• Senior recruits typically require at least a year before generating new business, and client relationships in investment banking are heavily institutionalized.
• Banks suffer the immediate impact of higher costs and lower morale due to hiring sprees, which require big compensation guarantees to lure talent.
• Citi has tried to gain market share by taking on more risk in the past but still bears the scars of this strategy.
• Perceptions of a bank's brand can take years, if not decades, to shift, and matching JPMorgan is not enough for Citi to be considered a top-tier bank.
• Internal headwinds, such as entrenched fiefdoms and control functions, can be formidable obstacles for banks looking to transform their investment arm.
• Consistent client coverage over many years, strong internal alignment, and an ability to put on greater risk without repeating past blunders are key to durable success.

Statistics:

• Citigroup has hired at least 10 ex-JPMorgan colleagues as part of its turnaround plans. (Source: Financial Times)
• UBS's attempt to flourish under Andrea Orcel had mixed results. (Source: Author's expertise)
• Deutsche Bank and HSBC have spent several decades trying and failing to crack the corporate finance big leagues. (Source: Author's expertise)
• The average time it takes for a senior recruit to generate new business is at least 1 year. (Source: Author's expertise)
• Citi's past attempts to gain market share through increased risk-taking have resulted in significant losses. (Source: Author's expertise)
• The weight of brand in investment banking can take years, if not decades, to shift. (Source: Author's expertise)

Sources:

• Financial Times: "Citigroup shakes up banking unit with raft of hires"
• Craig Coben (Author's expertise)
• Seda Experts: Craig Coben is a managing director at Seda Experts, a financial services consulting firm.