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Citigroup Inc. has built out its financial institutions investment banking group in recent years, and the company believes it is starting to see some payoff from the hires. Citi said that through April 27, it ranked No. 1 in announced mergers and acquisitions and investment-grade debt underwriting and No. 2 in equity underwriting for financial institutions, according to Dealogic's global rankings for 2012.
Recently, David Head and Peter Babej, co-heads of Citi's global FIG corporate and investment banking practice, spoke with SNL about the firm's international reach and how they see deal activity playing out in their space.
The following is an edited transcript of that conversation.
SNL Financial: What areas of FIG are the most active in terms of deal-making?
Peter Babej: From an M&A perspective, we're seeing quite a bit of activity related to Europe. Some businesses are being divested in Europe by some of the larger European financial institutions, but there are also European-owned businesses in the U.S. that are either being divested or brought to equity markets. We're also seeing quite a bit of appetite into Asia. Some of those also are European related. They are mostly about divestitures. We're not seeing a lot of traditional bread-and-butter domestic consolidation, but we all believe that will come.
David Head: That's correct. You would expect that because of the slow growth, there would be a lot of domestic consolidation because you need to find a way to grow earnings and the top line. But because of the regulatory environment and frankly the difficulty of understanding one another's balance sheets, that domestic consolidation has not occurred. We think it will at some point.
For bank consolidation, we have started to see smaller deals, but how come we have not seen larger deals?
Head: One reason is the larger players are facing much stricter regulatory testing. They have to basically do a stress test when they do a significant acquisition. So as a result, it takes a lot more time, a lot more work, a lot more effort to do even what would once be considered a simple...