Following the execution of several landmark transactions in recent years, Citi continued to build momentum in the precious metals sector in 2016. As a result, industry surveys conducted throughout the year place the bank among the top revenue generators in the global metals markets.
Rick McIntire, London-based head of metals at Citi, believes part of the bank’s growing strength in the market lies in its ability to navigate “tricky” jurisdictions and provide unique structures to a range of clients. He points to examples such as a gold and copper hedge provided last year to enable a consortium of buyers to make an asset acquisition in Indonesia. Employees from Citi offices around the world came together to work on the deal, which required a unique credit support package.
A separate transaction involved working with a Russian bank to hedge two million ounces of gold out to five years. It was executed on behalf of a Russian gold producer to hedge part of its production on a long-term basis. “Citi has strong relationships with regional banks that are predicated on trust and reciprocity,” McIntire says of the transaction. “We can rely on them to provide the credit risk and we can provide the market access with our superior risk appetite and pricing capabilities … this transaction saw a perfect harmony of our core competencies lock in what was a really significant transaction.”
It is Citi’s global footprint that enables it to be comfortable executing complex transactions, even in more difficult jurisdictions, says McIntire. In addition, as it has grown its precious metals offering over the past two years, other participants have left the market. McIntire says Citi has filled the vacuum by creating a business that can satisfy “the full continuum” of demand in precious metals. “We have structured our business over this time to ensure that whatever segment of the market is active, Citi is participating in it,” he says. “We are leveraging and harnessing what we have to offer in terms of our global footprint and client reach.”
In addition to its producer-hedging business and its portfolios of deposits and leases, Citi continues to increase its presence in the global central banking market, bolstered by a significant over-the-counter gold transaction with a central bank client. The deal, executed in the first half of 2015, continues to provide revenues for the bank and has helped it to expand its activities in this segment.