Citi signals confidence in post-Brexit London

The new head of Citigroup in Europe said he was confident that the City of London would retain its status as the region’s top financial centre regardless of the outcome of Brexit.

David Livingstone, who in February took over as chief executive of the bank in Europe, the Middle East and Africa, said that London would continue to benefit from its “unique timezone [and] the rule of law”, as well as “huge support mechanisms” such as an abundance of professional services firms.

“All these things . . . contribute to what makes a vibrant financial capital, and London isn’t going to lose any of that,” Mr Livingstone said in an interview with the Financial Times.

Mr Livingstone’s comments come as Boris Johnson’s plan to take the UK out of the EU by October 31 was dealt a blow by MPs at the weekend, when they backed an amendment that forced the prime minister to request a Brexit extension until January 31.

Citi has been the most bullish of all international banks on London’s future as a financial centre. It bought its £1bn Canary Wharf skyscraper earlier this year, in contrast to rivals such as Goldman Sachs and UBS, which have decided to lease rather than own their new London HQs.

Mr Livingstone said that the bank’s purchase of its European headquarters was “not only a sensible financial decision” but also “represented a positive statement about our confidence in London”.

However, he said that, over time, it was inevitable that banks’ eurozone entities would end up shouldering a greater burden of financing and trading, which would cut into London’s dominance without overtaking it.

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“There is a degree of EU sovereignty about this . . . they want the euro market to be located within the eurozone,” Mr Livingstone said. “So, sure, there’ll be business which leaves London, but I don’t think London fundamentally changes as the regional financial centre.”

Mr Livingstone dismissed the idea that the UK would go into a recession after Brexit, insisting that any devaluation in the pound would make exports more competitive and encourage foreign investment.

He also played down the impact of Brexit on Citi, arguing that while the bank would incur additional costs in Europe because of a “degree of duplication” these would be “manageable” and did not represent a “material item dilutive to overall returns”.

Citi is well placed for Brexit compared to many peers, as it already operates a network of licensed subsidiaries and branches in Ireland and on the continent.

However, Brexit has cost the bank more than $100m so far. The US lender is creating as many as 200 new positions across its three main hubs in Dublin, Frankfurt and Paris, where it is looking for a bigger office after traders lobbied to move there rather than Germany. 

It is relocating about 60 people from London and hiring locally for the remainder, but the UK will remain by far its largest international hub, with roughly 9,000 employees.

Citi’s approach has differed to Bank of America, which has spent $400m shifting hundreds of staff to its European headquarters in Dublin and creating a new 500-strong trading business in Paris. BofA executives have said there is no going back to London, whatever the Brexit outcome, warning that the “bridge has been pulled up”.

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Cambridge-educated Mr Livingstone, 56, joined Citi as head of Australia and his native New Zealand in 2016 from Credit Suisse, where he was vice-chairman of European investment banking. 

He has spent most of his career moving between the two regions, getting his first big job as head of Asia-Pacific M&A for Goldman Sachs in the late 1990s before jumping to HSBC for a time.

In recent years, Citi has been criticised by some investors, including activist ValueAct, for not acting decisively enough to streamline and focus its business lines and geographical footprint.

Performance has lagged behind domestic rivals such as JPMorgan and BofA, which have both increased far more in value since the financial crisis and generate higher returns.

“I would rebut the presumption that there’s a lack of focus in our strategy,” Mr Livingstone said. “It is of enormous value to a huge number of multinational companies, sovereigns and investors that . . . we can take them to 99 countries and territories around the world.”

Additional reporting by Robert Armstrong in New York



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