Citigroup Reorganizes Credit Trading as Lathrop Takes Leave

(Bloomberg) -- Citigroup Inc., home to one of the world's biggest bond brokerages, is restructuring its credit markets, municipal securities and securitized markets operations into a new unit to be led by Mickey Bhatia and Joe Geraci.

The pair will assume their posts atop the business, to be known as global spread products, in early May as credit markets chief Carey Lathrop steps down and takes a leave of absence from the company, according to a memo to staff. Ward Marsh will be chairman of global spread products.

“While these three franchises each have their own distinct needs and constitutions, their products have increasingly become a continuum,” Paco Ybarra, the New York-based bank's head of markets, said in the memo. “We thank Carey for his contributions and look forward to him assuming new challenges upon his return.”

Citigroup Chief Executive Officer Michael Corbat is among Wall Street bosses trying to bolster revenue from bond trading amid sluggish client activity. The overhaul announced by Ybarra creates a sprawling unit that deals in products ranging from esoteric credit derivatives to bonds sold by U.S. cities and towns to maintain roads and sewers.

It's at least the second time in a year that Citigroup has reorganized those operations. Last May, it named Bhatia and Lathrop to oversee its newly combined credit and securitized products businesses.

Salomon Background

Ybarra's memo didn't indicate why Lathrop is taking a leave, and a company spokeswoman declined to comment.

Lathrop started his career in the late 1980s at Salomon Brothers, the brokerage known for its willingness to take risk to capture big rewards, which eventually became part of Citigroup. Last year, some of his comments to colleagues during the depths of 2008 financial crisis were included in a trove of colorful chat messages and recordings made public as part of Lehman Brothers' bankruptcy proceedings.

“This is the time to make a lot of money,” Lathrop said in a Sept. 17, 2008, recording, according to Lehman's exhibits. “There are a lot less competitors... and there's a lot of bid/offer spread. And people have to do things.”

Read more: ‘Ringing the register': How Citi traders reveled over Lehman

Citigroup's municipal bond-trading unit is the biggest dealer in that industry, data from Coalition Development Ltd. show. Total trading volume for the products was about $3 trillion in 2017, down from $3.1 trillion a year earlier, according to data from the Municipal Securities Rulemaking Board. Geraci became deputy head of the business last year alongside Marsh, the operation's longtime head.

Citigroup's securitized markets business ranks third in Coalition's data. The firm ranks lower in credit trading.

Citigroup generated $948 million from spread products and what it called “other fixed income” in the first quarter of 2018, a 17 percent decline from a year earlier. The category includes credit, securitized products and municipal bonds.

To contact the reporter on this story: Donal Griffin in London at dgriffin10@bloomberg.net.

To contact the editors responsible for this story: Michael J. Moore at mmoore55@bloomberg.net, David Scheer, Dan Reichl

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