The tables have turned in the Euro-MTN issuing and paying agency (IPA) business. Citibank is back at the top of the programme league table and after relinquishing the title as best IPA for Euro-MTNs at last year's MTNWeek awards, the bank has won back 2002's crown in emphatic style. Citibank was the appointed IPA on 48 programmes in 2001 and was the agent off almost 7,000 issues during the same period. It was named on 30% more programmes than Deutsche Bank, which finished in second, and on 50% more programmes than JPMorgan, which was placed third. But the bank is not taking its success lightly. It fought hard in 2001 after a disappointing year in 2000 and Dirk Jones, European sales head at Citibank, is adamant that the bank will not be complacent about the gains it has made. "Last year was another tremendous year for Citibank," says Jones. "But it is imperative that we continue to listen and respond to the needs of our clients and provide the high level of service our clients have come to expect." In 2000 the story was very different. Citibank was named on just 24 facilities, half that of 2001, and was easily beaten to the top spot by Deutsche Bank, which was placed on 54 programmes. But Jones was not disappointed by this performance. He believes that the figures were not a true measure of their achievements. He says: "If you actually look at 2000's Euro-MTN IPA league tables and extract business that may have been awarded as a result of an arrangership appointment, you will see that Citibank was still the leading choice for issuers and market professionals." But the tendency to award IPA mandates based on arrangerships is changing. Issuers are taking more of an active role in selecting their IPA and have begun to realize the long-term value that IPAs offer. Colin Groome is head of sales and relationship management at HSBC and he maintains that, while a couple of years ago issuers simply appointed IPAs on the word of the arranger, they are now pushing more business towards their relationship banks. He says: "Issuers are taking a greater interest in who they appoint as their IPA. They are now more focused on directing business to banks who provide a specialized professional service and those who are their relationship banks. This has benefited us greatly." Jones, at Citibank, agrees. "Relationships are important and at Citibank we are pleased to be able to offer our clients the full range of services issuers should expect on a global basis. And, while it is becoming a more demanding environment, this is where having economies of scale in your business is a strength." Economies of scale have become much more important in the IPA business. Consolidation among the IPAs has continued to push those with smaller resources out of the market. In 2000, new programme appointments were spread out over 20 banks but last year this number fell to 16. HSBC, whose IPA business is viewed as a second-tier operation, finished fourth in last year's IPA programme league table. Despite its large size compared to some of the smaller players, Groome, at HSBC, believes that even they will have problems making gains on Citibank. He says: "In terms of numbers it will be difficult for us to catch Citibank. Citibank has been in the market a lot longer than we have and their acquisition of JPMorgan's IPA business (before the JPMorgan-Chase Manhattan merger) has helped to give them volume. But our aim is to be the best service provider, not the biggest. Of course we want to feature strongly in the league tables and that requires numbers. Our aim is to build quantity, but in the short term we definitely want to stress the importance of service quality." And it is the general move to more structured transactions in the Euro-MTN market that has forced up the quality of service provided by the IPAs. Structured trades require a lot more work from the agencies than vanilla trades, but the heightened workload has brought with it many benefits. The large number of structured trades and the complexity they bring has helped to raise both the profile and fee-earning capabilities of the business. But September 11th and the flurry of high profile corporate blowouts recorded earlier this year have stifled much of the structured business in the Euro-MTN market. Japanese issuers, who traditionally demand a large amount of structured paper, have remained quiet this year. Many Japanese investors were caught out by the troubles with Enron and have moved to safer vanilla and triple-A paper. Despite this move, Groome, at HSBC, does not think this has affected his business. "There has been a general drop in structured business activity," he says, "but in our book of business this is not significant and we can see this picking up. There are plenty of new programmes and structures coming in and there are more than enough opportunities still there." Jones, at Citibank, agrees. He says: "The structured MTN business has still been an integral part of our activity and we even see our services being used to support other IPAs when they cannot support the requirements of their structured MTN business." Despite movements in the market the other IPA houses will have their work cut out if they are to catch Citibank and compete for next year's top position. Jones, at the bank, is keen to stress that Citibank will continue to improve client satisfaction and if his confidence is to be believed, then Citibank could well see its name on 2003's award as well. He says: "In terms of 2002 we will continue to strive in our efforts to provide customer satisfaction when providing agency and trust service support to the debt markets. We aim to continue the growth of our market share and will invest in the IPA business to remain at the forefront of the market place."
June 07, 2002
