The resurgence in investment banking as a career path from HBS was evident as over a hundred students packed into Aldrich 209, where a standing room only crowd listened to Mr. Michael Carpenter, Chairman and CEO of Salomon Smith Barney and the Head of Citibank’s Global Relationship Bank. Mr. Carpenter, a 1973 graduate of HBS and a member of Section E, shared his thoughts on the major trends in investment banking and how Citigroup and Salomon Smith Barney are poised to take advantage of changing industry dynamics.
Mr. Carpenter spoke at length about how technology, globalization and convergence are changing his industry. He asserted his view that the Internet is well on its way to becoming the telephone of the 21st century. It will be a real tool, used by real businesses. But it will require major investments and will drive consolidation in the industry, as smaller players will not be able to keep up their investments in new technologies. Mr. Carpenter citied Citigroup’s $450 million investment in new technologies for its financial consultants as an example of the scale required to keep pace.
As important a trend is the globalization of investment banking and financial markets. The emergence and growth of wealthy individuals and capital markets in all corners of the globe is driving the need for presence in all major markets. Finally, the convergence of commercial and investment banking is radically changing the competitive structure of the industry, as new larger players are able to use their capital to effectively complete transactions. This rational drove some recent transactions in the industry, including the CSFB-DLJ and JP Morgan-Chase mergers.
Perhaps to the surprise of many in the audience, Mr. Carpenter referred to the gigantic Citigroup as a startup, a product of four mergers that is now poised to rapidly take advantage of the industry changes described above. He mentioned the acquisition of Schroders, the venerable U.K. investment bank, and the Nikko Salomon Smith Barney venture in Japan, where the company has 41% of the equity markets business as examples of the globalization that Citigroup is experiencing. He also highlighted the value of synergies with Citibank, seen through a 50% increase in revenues from heritage Citibank clients in 1999.
For the anxious HBS student wondering what all of this means for their job search, Mr. Carpenter offered his views. He expects there to emerge 4 or 5 major firms, who together will have a dominant share of the global investment banking busines. While he expects a recession this year and feels that 2001 will be a difficult year for investment banking, he says Citigroup is right where it should be and ready to emerge as a dominant player in the industry.
As another class of HBS students consider the employment options, they are left to consider Mr. Carpenter’s experience in investment banking. He described it as a fun business, intellectually challenging, but one that will become “crunchingly competitive” and more and more “ebullient” in the coming years. It sounds like just the challenge for the dedicated HBS student.