Citigroup intends to expand its network in Greece by opening new branches, but does not rule out the acquisition of another bank, says Tom Maheras, CEO of Global Capital Markets within Citigroup’s Corporate and Investment Banking Group. Born in Chicago, Maheras is a second-generation Greek American. He is also a member of the Citigroup Management Committee and vice chairman of the US Treasury Department Borrowing Advisory Committee. He told Kathimerini that the cash flow in global markets will subside, so evaluations are set to decline, increasing risk premiums. Some 18-20 months ago, Citigroup put all activities in stocks and bonds under the same management that you have undertaken. What were the reasons for this restructuring? We have reorganized the Corporate and Investment Banking of Citigroup by placing all corporate banking efforts under one domain and all products in another, Citigroup Global Capital Markets. The reason for that is that the various products have converged to some extent, in terms of risk management. Investors, whether institutional or small, now look upon these product categories (stocks and bonds) as a whole and not separately as they used to until recently. We have both a convergence in products and a convergence of clients, who now find commonalities in managing the risk of various products and require the support of our specialized staff, and not just for any one product category. What are the main trends in your business? Which domain do you expect to grow faster, stocks or bonds? Both stocks and bonds benefit from the great and long-term trend of financial disintermediation [i.e. transferring investment risk of the deposit-loan mechanism from banks straight to clients through bond purchase]. Companies now choose not to resort to bank loans but to capital markets, issuing either stocks or bonds. In other words, capital markets offer more effective means to companies for their funding: Instead of them going to a number of banks, they address thousands of investors around the world. We therefore expect both market domains to develop generally at the same rapid rate. What are Citigroup’s main forecasts regarding stocks and bonds? Citigroup is too big a corporation for us to refer to a single view. Still, we might argue that the global market has enjoyed too much cash flow in recent years. These liquidity conditions have pushed securities’ valuations higher and extra premiums of risk lower. Liquidity is a circular phenomenon, so I think that at some point in the near future we shall see a decline, and therefore a drop in valuations in some categories of securities. The central banks have already begun to raise interest rates in some countries. Yields will be greater than now. These macroeconomic factors will in the next 12-18 months lead the markets to somewhat lower valuations; cash flow will decline and risk premiums will revert to more normal levels. For instance, in the last three to six months stocks in emerging markets have recorded a great rally, the difference of yields between various categories has diminished as yields have decreased and there are fewer and fewer places where one can earn money. At some point, cash flow will change direction. This is not a particularly pessimistic attitude toward the markets and does not necessarily translate into a drop in indexes, but possibly to a slower rise and smaller transaction turnover. How important is the Greek market for Citigroup and what are your plans for your activity here? Both the public and the private sector have done a very important job in developing the capital market in Greece over the last few years. From the simple stock and bond products the market has moved on to structured products, securitizations, derivatives, etc. This momentum is an opportunity for us since we have had a strong presence in this country for many years. Citibank was the «main negotiator» for Greek state bonds for two years before the merger with Salomon Smith Barney in 1998, having significant presence in Athens transactions. The distribution network to Salomon’s international investors, combined with the local presence of Citigroup, brought many international investors to the Greek drachma market, supporting the «convergence game» in Greece’s process of accession to the single European currency. Greek state bonds are now part of the broader capital market of the euro, which was and continues to be a great success story both for Europe and for Citigroup, which leads in the market of issuing bonds from Greek credit institutions. We specifically are first in the securitization market having organized and distributed all the deals in the main Residential Mortgage Backed Securities (RMBS) done to date in Greece. As for our plans, we will keep investing and bringing in new products. We also have a strategy for expanding our activity in the country, initially by opening new branches but without ruling out the possibility of a strategic buyout if deemed appropriate.