citi-downsizes-bond-syndication-desk

Citi downsizes bond syndication desk

Asia's syndicate bankers were surprised by the news this week that John Lefevre, a key figure in the region's bond syndication activities, has left Citi's desk.
In a move by Citi to redeploy staff, John Lefevre, who has worked at the firmÆs Asian bond syndicate desk since 2004, has been relieved of his duties. The news comes just prior to Citi's earnings announcement due today which is expected to detail fresh cost-cutting initiatives.

Citi has been one of the worst-hit casualties of the subprime turmoil, along with Merrill Lynch who early this morning reported its intention to cut 4,000 jobs after revealing a $1.97 billion loss in the first quarter. This compares with a $2.03 billion profit in the same period last year.

Lefevre, who handled dollar and euro bond issuance with Citi's head of syndicate Paul Au in Hong Kong, has reportedly been requested to consider other options at the bank, including the private placements desk. Benedict Leh, who managed local currency transactions from the firmÆs offices in Singapore, has also been affected by these personnel changes and is reportedly also looking at in-house opportunities.

A source who spoke to FinanceAsia on condition of anonymity states that this is part of a natural re-alignment by the bank to move employees to more profitable areas, given market conditions. Should the Asian bond markets pick up again, Citi is flexible enough to re-deploy both men back to those areas when needed, the source says.

Paul Au will be left to handle dollar, euro and local currency deals, assisted by Nicholas Chia.

The move comes as the issuance of global bonds from borrowers across the region has been severely curtailed as a result of the subprime crisis and deepening fears of an imminent recession in the US.

Total sales of new debt globally dropped by 45% to $1.2 trillion in the first quarter of 2008 compared to a year earlier, according to Thomson. Citi staff in the US and Europe in similar positions to Lefevre and Leh have reportedly suffered the same fate.

Despite these grim figures, bankers across the region were surprised by CitiÆs decision to so drastically cut the syndicate desk from four people to two. ôThe move leaves Citi exposed on a desk which should still see reasonable flow from the region for a bank that size,ö comments one syndicate banker. ôIdea generation in Asia G3, and importantly the quality of client service follow-up on international or local currency deals, will suffer,ö he speculates. "Those clients are all still there and need advice even if they are not doing deals right now.ö

Others also say that it wonÆt be so easy for the men to return to their former positions. The new desk on which both Lefevre and Leh might work may not want to let them go if markets pick up again. ôItÆs usually a one-way valve,ö says the banker.

If that happens Citi could be left looking for new staff that potentially wonÆt have the same experience or reputation. ôIf the market remains bad, those firms that are downsizing will be okay,ö reckons one syndicate banker. ôBut if it comes back û even a bit û they will lose out.ö

The American bank declined to comment regarding the moves, but a rival G3 syndicate banker says Lefevre ôwas a great asset to Citi's syndicate deskö.

Although Citi may be one of the first banks to downsize its bond syndication desk in Asia, there are rumours on the street that other institutions will follow suit. Despite the fact that the region is generally considered well-placed to weather challenging conditions, market specialists remain cautious in their forecasts for new issuance. Although two deals pricing in quick succession (Kospo and Swire) have recently given cause for optimism, new transactions in the short- to medium-term are likely to be confined to the high-end of the credit range.

Citi has remained active this year despite the quiet markets, working on three of the five global deals that have priced (Korea Development Bank, Korea Midland Powers and Korea Southern Power). The bank holds the number one position in Asia-Pacific G3 debt capital market transactions with a 34.7% market share. It also holds the number one position for yen-denominated transactions from Australian borrowers, with a 38.8% market share, according to data provided by Dealogic.
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