Brexit has triggered a wave of relocations of bankers from London to other European cities, but Citi’s recent decision to open a junior banker hub in southern Spain shows that a broader structural shift is underway.
Citi is initially aiming to staff its EMEA Junior Banking Analytics Group in Málaga with 30 staff who will be overseen by a couple of seniors drafted in from other offices. The move has less to do with Brexit than with challenging labour market conditions. It is part of a broader push by Citi to make itself a more attractive place to work.
The fact that Citi has chosen to do this raises two questions. Firstly, why are top tier investment banks suddenly struggling to hire and hold on to staff? And secondly, why is opening an office in a provincial capital on the European periphery part of the solution?
The obvious catalyst, other than Brexit, is the pandemic, which has prompted finance professionals to reconsider assumptions about their quality of life while also bringing to light the possibilities of remote work.
But Covid-19 was really only a trigger. The underlying forces pulling talented graduates away from banking and pushing bankers away from established centres of activity like Wall Street and the Square Mile will continue to have an impact long after the pandemic is over.
One of them is the high pay and perks on offer from tech giants like Google and Facebook. Another is the constant improvement in technology, which allows much more work to be done away from the office.
Of course, some activities will always need to be carried out by bankers working in close proximity with each other, but increasingly that is being done beyond the confines of a handful of historic financial districts.
Citi’s initiative in Málaga shows that the firm believes it is realistic to build the critical mass necessary to carry out top class investment banking activity, albeit at a junior level, quickly and from scratch.
It depends on the type of business they are carrying out, of course. But there are other examples of bulge bracket banks zagging where others have zigged and planting roots in less conventional locations.
For instance, while most major firms have picked Paris as the centre of operations for their EU debt capital markets operations, JP Morgan is said to have sent securitization bankers to Madrid and Milan instead with the proximity of local clients in Iberia and Italy more than compensating for the distance from sales and trading desks in the French capital.
For Citi’s junior bankers in Málaga, meanwhile, the cost of living will be a major advantage. In the coastal Spanish city, €2,500 per month will rent a 1,800 square foot three bedroom apartment in the historic centre. In Canary Wharf, the same amount would get you a 440 square foot studio. And that’s before taking any personal tax advantages into account, or the weather.
Until now, banks have responded to junior bankers’ complaints with salary increases and other perks, but these will only go so far to offset the housing and cost of living crises that are bubbling up in London and New York. It makes sense for banks to be looking for more sustainable solutions, having had to throw money at analysts repeatedly to quell dissent over the past year and a half.
Citi’s arrival is certainly a coup for Málaga, which has been looking to cultivate an image for itself as the ‘Spanish Silicon Valley’ and will also soon host a Centre of Excellence of Cybersecurity built by Google.
Is it reminiscent, though on a smaller scale, of Miami, whose mayor Francis Suarez has been working hard, and with considerable success, to lure the blockchain scene away from San Francisco? Examples such as these will surely inspire the leaders of other second tier cities and convince them that they too can compete with their more storied, larger rivals.
The example of distributed ledger technology, by the way, is highly pertinent. This new innovation has at its heart a decentralising impulse that is driving a lot more than crypto asset bubbles. It would be unrealistic to assume that this widespread centrifugal force would bypass capital markets entirely.
The recalibration of global capital markets may not completely topple London and New York, but this wave of upheaval still has a long way to run. Bankers and other market participants should prepare for movement.
