Citi’s head of securities services, Okan Pekin, has highlighted a range of benefits to the bank’s sweeping management reorganisation as the custodian looks to build on a run of recent success which has seen it top $1 billion in revenue in three consecutive quarters.
The overhaul saw an entire management layer taken out within the organisation, with five new division heads reporting directly to CEO Jane Fraser. Pekin’s role remains unchanged, and will report into Shahmir Khaliq, head of services at Citi, a unit which contains securities services.
“I think the change is only positive,” Pekin tells Global Custodian. “The announcement removes archaic historic division structures, takes out a management layer and reformulates the role of geographies – which is only going to accelerate decision making.
“As it took out the management layer, it elevated five divisions, with our business under ‘Services’ which will help focus investment dollars, priorities and turnaround times.”
While many media outlets have pointed to the changes targeting a ‘turnaround’ at Citi as a broader organisation, the asset servicing business has been growing by two critical metrics over the past 12 months – assets under custody and revenues from the securities services business – the latter through frequent double-digit increases.
There have been some notable business wins in the Asia Pacific region over the past four months with mandates coming in from Hong Kong, South Korea and Australia. There was also a significant mandate from Singlife earlier this year whereby Citi and BlackRock were appointed to jointly upgrade its asset management capabilities across its front-, middle- and back-office.
Just days before the conversation with Pekin, Citi also became the first digital custodian participant of BondbloX Bond Exchange (BBX), the world’s first fractional bond exchange using the latest in distributed ledger technology.
Winning market share
Meanwhile, though it was some time ago now, the landmark mandate from BlackRock which saw Citi become asset servicer for the largest percentage of its US ETF business still continues to be a defining moment in the asset servicer’s recent history, along with its ensuing relationship with the asset management giant.
“We continue to win a significant amount of market share,” says Pekin. “We are investing pretty aggressively into our platforms, into tokenisation, into ageing platforms.
“What I’m hearing from clients about Citi is positive. The reception we get from our network is very encouraging.”
On the APAC growth Pekin highlights: “It’s got a nice balance of established markets, coupled with giant growth markets like China and India. Those markets are institutionalising quickly. The asset management space is growing, so is insurance and so are banks, and we are well positioned because of a fantastic network we’ve grown over 100 years.”
The largest sub-custodian in the world has also been acquiring units or been referred to by asset servicers exiting the market – Nordea and NAB Asset Servicing being recent examples – in a trend that continues to bolster Citi’s standing across its broad range of markets.
Pekin explains how he sees the challenge for providers in having to continually invest in and maintain platforms, people and technology.
“The first question is whether you have the capabilities? The next question is do you have the critical mass to invest? If you don’t have the scale – can you keep up?” he highlights.
“We believe we’re in the winning group of the industry, we have the network, we have the client coverage and we have the management capability. In the long run I think we’ll be a winner in the consolidation because of our platform and client coverage.”
Data, tech and client needs
Back in 2022, Pekin received the Lifetime Achievement award on the same night Citi won the coveted Global Custodian of the Year honour, in what emerged as a standout year for the asset servicer.
Along with the achievements of the past and the notable mandate wins this year, Citi is also looking at the future through its strategy, data provision and technological change, in what appears to be quite aggressive investments into its platforms.
Pekin highlights the custodian’s approach when it comes to meeting evolving client needs and upgrading its technology.
“You need to give asset managers the whole package, middle-office services and data,” he explains. “The people who can provide that, not just cost competitively, but with a light technology layer, and data in the cloud, will be the successful ones.”
On the pace of change in the industry in 2023 compared with the past, he adds, “The biggest difference is the agile approach. The platforms have been built over decades but now with technology, you can throw the problem into a large language model in no time. The cycle time of innovation is incredible. We learn about potential failures quickly as well, and I highlight that because you can experiment intensely before finding a solution.”
Last June Citi officially announced develop and pilot digital asset custody capabilities in partnership with Swiss-based fintech METACO, meanwhile the move with BBX further showed the custodian’s approach to new technologies.
Pekin was keen to point out the benefits of focusing on the technology rather than the asset.
“People talk a lot about digital assets as an asset class but the bigger trend is the technology,” he explains. “If you tokenise and move into digital platforms, there is a huge client experience benefit and functionality benefit. I believe we need to pay attention to the tech and not just focus on the assets.”