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February 9, 2016: Updates with insurance risk manager of the year award
What if regulators had broken up Citi after the financial crisis, as some argued they should? There would be one less too-big-to-fail bank to worry about, but the financial services industry would now lack a leading light.
At a time when most of its peers are scaling back their ambitions – choosing to concentrate on asset management and the few bits of investment banking that are still appealing, such as foreign exchange and equities trading – Citi continues to offer full-service investment banking.
The bank is active across the full range of asset classes, including credit and commodities, and still sees derivatives as a core offering – with an appetite not only for the flow business but also advisory and solutions work, as well as derivatives clearing.
The strategy appears to be working: Citi reported profits of $17.2 billion in 2015, the most since 2006.
"We've come through the hard times with a franchise that is strong in all the core products," says Paco Ybarra, head of global markets at Citi. "We are profitable in all the core businesses, including commodities and equities. That is not a given, it's not easy to achieve, but we had the strategic determination, the right tactics – and a bit of luck. Our returns are above our cost of capital and we're ready to do significantly better."
Citi wins this year's derivatives house of the year award and also gets the nod in the credit, over-the-counter client clearing and single-dealer platform categories.
Elsewhere, the bifurcation between full-service investment banks and more specialised players is clear to see. Citadel Securities was named rates house of the year – the first time a non-bank has claimed this award.
Citadel's approach to rates trading contrasts sharply with Citi's full-service model. In the over-the-counter derivatives markets, the Chicago-based non-bank market-maker only trades US dollar and euro-denominated swaps – it doesn't quote non-cleared products, and doesn't offer research or advisory services.
But what it does, it does extremely well. Citadel's swaps trading operation was ranked first on Bloomberg's swap execution facility (Sef) by volume, response time, hit ratio, client enquires and risk traded at the end of 2015 – a remarkable feat considering it only opened for business on October 27, 2014.
More importantly, the firm's diverse and enthusiastic client base believe it is forcing incumbent dealers to change for the better: "Citadel has improved the market structure, in terms of people quoting sharp prices and coming back faster. It's really forced the dealers to move – I really like that aspect. Even when they don't win, they've done a good service to the industry, making sure others compete on the same terms," says a senior trader at one large US asset manager.
In other awards, Alexandre Antonov of Numerix was named quant of the year for his work on negative rates modelling; Citadel's investment arm was named hedge fund of the year; Vanguard claimed the award for best asset manager; LCH.Clearnet wins clearing house of the year; while trueEx takes the award for Sefs.
As always, picking the winners was extremely difficult. Risk asked candidates to submit detailed information on their businesses, and shortlisted firms underwent face-to-face and telephone interviews. Risk then gathered feedback from clients and other market participants.
The final decisions were made by Risk's editors and journalists, weighing a number of factors, including risk management, creativity and innovation, liquidity provision, quality of service and customer satisfaction, and engagement with regulatory issues.
Where decisions were tight, client feedback often helped settle the issue. The Risk editorial team thanks all this year's participants for their time and help.
The profiles of our winners can be found below. Photos from the awards night are available here.