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Citigroup Expands European Credit Trading as Rivals Cut Back

Citigroup Inc CEO Vikram Pandit
The growth comes as the New York-based firm, led by 55-year old Chief Executive Officer Vikram Pandit, cuts jobs elsewhere to pare costs. Photographer: Andrey Rudakov/Bloomberg

Citigroup Inc., the third-biggest U.S. bank, plans to increase the headcount for its European credit sales and trading team by as much as 5 percent to seize market share from rivals cutting back in the region.

The bank is looking to hire more staff for the business in the next six to 12 months, according to Conor Davis, head of credit sales for Europe. Citigroup, which has about 100 people in the team, is growing while European firms including Royal Bank of Scotland Group Plc and Deutsche Bank AG shed thousands of workers.

Citigroup is expanding in European debt sales and trading as lenders across the continent sell assets to meet tougher capital requirements and weather the region’s debt crisis. The growth comes as the New York-based firm, led by 55-year old Chief Executive Officer Vikram Pandit, cuts jobs elsewhere to pare costs.

“Whilst keeping headcount flat globally we have been gradually increasing staff in Europe for the past four years, filling in the gaps in our franchise, with investment-grade corporate debt trading and distressed being the two areas of focus,” Davis said in an interview from his London office.

Citigroup’s credit sales and trading team will seek to profit from matching buyers and sellers as European lenders shrink and sell assets.

‘Potential Growth’

“We see areas of potential growth which would require further investment,” Davis said. “This crisis and the deleveraging of European banks are bringing a lot of trading opportunities because risk needs to be shifted out of the banks’ balance sheets.”

European banks may need to reduce their balance sheets by $2.2 trillion to $3.8 trillion through asset sales and reduced lending to meet tougher capital requirements, the Washington-based International Monetary Fund said in a report in April. Disposals will include about 500 billion euros ($623 billion) of loan portfolio sales from banks in the next five to 10 years, Moody’s Investors Service said on Aug. 8.

The European Central Bank’s injection of more than 1 trillion euros into the financial system since December has helped banks slow the pace of asset disposals. This means the amount of deals seen so far “is only the tip of the iceberg,” Davis said.

Citigroup has already lured some credit traders from rival firms including Morgan Stanley’s Nick Gray, the bank said earlier this month. In June it hired Bjoern Wiegelmann from Deutsche Bank and Nicolas Dujols from Capula Investment Management LLP, a $13 billion hedge fund firm.

New Hires

In credit sales, Citigroup hired Pepijn Voorn from Bank of America Corp., Anju Kapur from Lloyds Banking Group Plc and Christopher de Simencourt, formerly with Natixis, the U.S. bank said last month.

Other parts of Citigroup are under pressure to cut jobs. The bank disclosed plans to eliminate about 1,200 workers from the securities and banking division in January and said in February it won’t make “meaningful investments” in the business this year. The unit, overseen by Jamie Forese, includes trading and investment banking.

Citigroup’s fixed-income trading revenue rose 9 percent from a year earlier to $7.55 billion in the first half of 2012 excluding accounting adjustments, according to regulatory filings. It’s still 12 percent less than the $8.6 billion the bank posted from the business for the same period in 2010.

The stock rose 0.07 percent to $30.75 at 11:12 a.m. in New York today, compared with the S&P 500 that fell 0.25 percent.

Headcount Cuts

The lender probably won’t need additional “massive” headcount reductions to respond to market challenges, Chief Financial Officer John Gerspach said in July. Citigroup plans to cut about 350 more jobs from the securities and banking division this year, a person familiar with the matter said in July, asking for anonymity because the changes haven’t been announced publicly.

Citigroup’s European credit business is hiring when financial firms based in western Europe have announced more than 30,000 job cuts this year. This compares with 5,000 in North America and accounts for 73 percent of the industry’s global reductions, according to data compiled by Bloomberg.

Deutsche Bank, Germany’s biggest lender, said on July 31 it will cut 1,900 jobs, including 1,500 at the investment bank, as part of an effort to save 3 billion euros. Most of the reduction will take place outside of Germany, the Frankfurt-based bank said. RBS said in January it will cut about 4,800 jobs, including 3,500 at the investment bank as it jettisons unprofitable units.

“It’s a great time to expand in Europe because with banks under cost pressure there are really good people available that weren’t previously,” Citigroup’s Davis said.

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