Ex-UBS, Citi Muni Bankers Hired by Rivals Eyeing Bond-Sales Revival

(Bloomberg) — Smaller underwriters are seizing on UBS Group AG’s and Citigroup Inc.’s retreat from the municipal-securities business by hiring nearly two dozen of their former bankers, seeking to benefit once new debt sales rebound from a two-year slump. 

Firms including Hilltop Securities Inc., Siebert Williams Shank & Co., Oppenheimer & Co., Ramirez & Co., Jefferies Financial Group and Academy Securities hired public-finance bankers from UBS and Citigroup, both of which last year decided to pull back from the state and local government bond market.  

The expansions show confidence that the pace of new debt sales will likely rebound as the Federal Reserve signals it’s moving toward cutting interest rates and federal pandemic-era aid disappears. It also marks an effort to fill the void left by the two big banks, which once mounted major pushes into the industry before changing course as executives cut costs and focus on the most profitable businesses. 

“Other than during the financial crisis of 2008, I cannot remember another time in the last 30 years when there has been such a large number of talented bankers available,” said Elizabeth Coolidge, a former UBS banker who was hired by Oppenheimer & Co. “There is an opportunity for other firms to hire talented bankers who can help grow their practices in areas where they may not have participated previously.” 

The municipal-bond underwriting businesses stagnated over the past two years as the Fed’s steep rate hikes slowed the pace of borrowing, in part by stanching what had been a steady stream of refinancing when rates were low. That slashed the volume of new long-term bond sales to about $363 billion last year, a more than 20% drop from 2021, according to data compiled by Bloomberg. 

Citigroup, the second-biggest muni underwriter as recently as three years ago, late last year announced that it was shuttering its public-finance business, eliminating about 100 jobs, as part of a broader shakeup by Chief Executive Officer Jane Fraser. 

As the bank was considering closing the unit, about 10 health-care bankers left for Jefferies, which vaulted to the third-ranked underwriter in 2023. Long-time Citigroup strategist Vikram Rai, who left the bank in June, was hired by Wells Fargo & Co. a few months later.

While UBS was a smaller presence than Citigroup, it had hired dozens of bankers in recent years as it pushed back into municipal underwriting, after shutting that business during the 2008 financial crisis. But in October, bank executives announced the unit would reorganize and shift away from working for state and local governments as an underwriter, though it would still buy bonds issued in auction sales. 

Academy Securities, a small bank, this month hired Austin-based UBS banker Bech Bruun to make inroads in Texas, whose fast-growing population has turned it into the biggest source of new municipal securities as governments build new roads and schools. Executives at Siebert recently brought on Giles Nicholson, a former UBS employee who will lead a new division focused on quantitative solutions. 

An executive at Siebert, a woman- and minority-owned investment bank, said it’s still looking to expand by hiring bankers focused on transportation issues or based in the Pacific Northwest or Southeast. 

“I am still shopping,” said Gary Hall, president of infrastructure and public finance at Siebert.

Dallas-based Hilltop this month said it hired a half dozen former UBS bankers, with Chief Executive Officer Brad Winges seeing the firm in a “unique position to benefit as peers exit the business.”

The pullback by UBS and Citigroup came after the industry has also been drawn into political tussles in some Republican-led states, where officials have sought to blackball banks over issues like gun control.

The biggest impact on the business, however, has been the steep slowdown in borrowing brought on by the Fed’s rate-hiking campaign, as well as the influx of federal aid during the pandemic that made many governments flush with cash. But with inflation coming down, the central bank is expected to shift to cutting interest rates steeply this year, giving governments more incentive to borrow for public works. 

“The general consensus among our members is that the worst is likely past, and issuance is likely to grow,” said Michael Decker, senior vice president at the Bond Dealers of America, a Washington lobbying group for regional underwriting firms. “That’s good news for the banking business.”

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