Corbat said Citi was focusing more on “target clients.”
At Deutsche Bank, co-CEO John Cryan said late last year that the bank will cull its client list by half in certain business lines. Bank executives have also spoken of target clients in the division that handles trading, where some 500 customers generate 80 percent of revenue.
Goldman Sachs Group’s equity research team has also directed its resources toward heavy-volume hedge fund shops, according to someone familiar with the bank’s policies. Representatives of Goldman Sachs and Deutsche Bank declined to comment.
Even smaller regional banks have lists, with Stifel Financial dubbing a roster of 21 target clients its “Blackjack” list, according to a person familiar with the matter. CEO Ronald Kruszewski says he’d be “surprised at any firm that is trying to sell a product that didn’t have a list.”
This chase for a few prized clients has been spurred by dwindling revenue in some bank business lines. Post-crisis regulations have made it harder for banks to make money by forcing them to hold more capital against risky assets. In this environment, “everyone is talking” about how to boost profitability, says Greg Braca, head of U.S. corporate and specialty banking at TD Bank.
To make the cut for Citigroup’s favored list, firms typically must generate $2 million annually in trading revenue with the bank. Each of the Focus Five firms trade multiple times that amount. Representatives of all five declined to comment.
“It’s a dog-eat-dog world,” says Kevin Kelly, the chief investment officer for Recon Capital Partners in New York. “Its tough, but that’s just how it works.” Some say the odds of success on Wall Street are tilted more and more toward those with the deepest pockets. Says Jeff Sica of Circle Squared Alternative Investments in Morristown, N. J.: If you’re not a big client, it’s become “a major disadvantage.” Sherwin-Williams takes a plunge with Valspar. Bringing the two paint brands together is a big-box play. The deal, which may be subject to antitrust scrutiny, will help Sherwin-Williams get more coverage in chain stores such as Lowe’s, as well as shops abroad. Currently the paintmaker sells its brand only at its own stores, which tend to draw contractors, rather than the do-it-yourself crowd.
The bottom line Citigroup and others on Wall Street have focused their businesses on the care and feeding of a smaller number of top clients.
Edited by Pat Regnier Bloomberg.com