Deconstructing Citigroup's enormous European hiring push

Citigroup is hiring in Europe. Financial News has an article today saying it's getting a big hiring push on.

Apparently, Citi wants to add 'hundreds of bankers and other staff to its European securities and investment banking business.'

It allegedly wants to recruit some of these people before the end of the year and is soon about to make some serious announcements concerning, 'senior hires in advisory, debt capital markets and equity capital markets '

All this hiring follows a period in which Citigroup cut staff post the financial crisis. Between 2007 and 2009 it reduced headcount by 14% (FN says the reduction was 17%, but its calculations look suspect).

Is Citi really about to embark upon an enormous European hiring spree? Well...

The impetus is there

Citigroup certainly needs to do something. In European IBD, its recent performance has been atrocious.

As Bloomberg pointed out in September, Citigroup went from being involved in 43 EMEA IPOs between 2006 and 2008, to 1 in 2009, to zero in the nine months to September 2010.

During this period, it also plummeted from 1st to 8th in terms of European M&A advice.

And by the third quarter, EMEA revenues at Citi's Institutional Clients Group were down 37% year-on-year.

Hiring's been happening for a while

The reality is, however, that Citi has already been building its EMEA business; this simply looks set to continue.

Last year, Citi claimed to have hired

300 ECM professionals between January and October. In July 2010, it revealed the arrival of

7 ECM and corporate broking professionals. In September, Financial News reported that Citi had hired 16 people for its emerging markets equities team.

And in its Q3 conference call, Citi identified cash equities as an area of growth.

Headhunters in London say Citi has also been building its equity derivatives platform under Mike Pringle (with an emphasis on Delta One), and that it's got at least two London equity research mandates to be filled ASAP.

Any claims that Citigroup is about to ramp up hiring therefore look a little like a PR exercise. Recruitment at the bank is nothing new; Citi has been rebuilding for a while.

Any hires announced in the next month happened a while ago

Headhunters in London confirm that Citi has some senior hires to announce between now and Christmas. However, these are hires which took place several months previously.

"They hired six or seven ECM and DCM people over the summer, but those people have been on gardening leave and they haven't made the announcements yet," says one headhunter.

At the senior end, Citi is still active and is prepared to buy people out, even now

Financial News also claims that Citi is so keen to get people on board that it is willing to buy out their bonuses.

This is unusual given that anyone hired at this time of the year will have three months' gardening leave and won't join until mid-January at the earliest. This means their entire 2010 bonus will have been bought out, but Citi will have absolutely nothing to show for it.

Crazy as it seems, one senior headhunter confirms this is the case. "Citigroup are keeping us incredibly busy," she says. "If the situation requires it, they are prepared to bring people on this year."

By hiring people in 2010, instead of waiting until 2011 when bonuses have been paid, Citi has the advantage of being able to pay upfront cash sign-ons. From January 2011, these look set to be banned by the FSA. Thereafter, all banks will have to pay sign-on bonuses according to the deferral schedule of the bonus they're buying out.

If it hires people between now and January, Citi will therefore be able to lure people with cash. "From January, people will probably have to wait a lot longer to get their sign on bonus," says Nicholas Dent, a lawyer at Barlow Lyde and Gilbert.

Only very senior hires are likely to benefit from this treatment. Nevertheless, Citi's existing staff have reason for concern: an already depleted bonus pool is in danger of being diluted by big ticket hires in the final months of the year.