Citibank bills itself as the bank that never sleeps, but for the past few years, its corporate lending business has been in a state of suspended animation.

Once feared and loathed by other banks for its power and arrogance, Citibank has taken a back seat to Chemical Bank.

Building on its yearend 1991 merger with Manufacturers Hanover Corp., Chemical displaced Citibank last year as the top syndicator of corporate bank loans.

In the first quarter, Citibank ranked a distant fifth in terms of being a lead bank or co-agent on widely syndicated corporate loans.

Still in the Running

But competitors do not count Citibank out and say that if the nation's largest bank ever wakes up, it could once again become the dominant force in the corporate loan market.

Indeed, there have been signs that Citibank is beginning to stir.

Following a sweeping reorganization of its North American corporate finance division in February, Citibank's deal flow has picked up.

Right now, Citibank is leading some $15 billion worth of deals, including $4 billion that have not yet hit the loan market.

"We've done the architectual work. Now it's time to rebuild morale, execute deals, and demonstrate Citi is in business," said David Browning, who was named division executive of a new structured finance group as part of the February reorganization. Among other things, he oversees loan syndications.

Tenacious Rival

But unlike Citibank, which did little to defend its top ranking in loan syndications, Chemical is not likely to give up its market leadership without a fight.

Citibank also probably lacks the capital strength to launch a full-throttle attack on its chief rival.

Beginning in 1990, huge losses on commercial real estate loans threw Citibank into a tailspin from which it still has not fully recovered.

Tier 1 Lags Behind

The losses badly eroded Citi's capital, weakening its ability to underwrite loans. Massive lay-offs and personnel shake-ups, meanwhile, disrupted relationships with clients, sources said.

While Citibank is stronger now than it was a few years ago, when its very survival was in question, Citicorp's Tier 1 capital ratio at the end of the first quarter of 1993 was the lowest of the money-center banks, said Raphael Soifer, banking analyst at Brown Brothers Harriman & Co.

More so than others, Citi can ill afford to get stuck holding big underwriting positions on bank loans.

Citibank must be sure that its deals are priced attractively enough to appeal to banks and other investors in the loan market.

But if Citibank wants to regain its market share, it might initially have to compete on price to win underwriting assignments in some cases.

A Drag on Profits

Low underwriting fees on the front end and generous syndicate fees on the back end would cut into Citi's profits.

Mr. Browning said that while Citibank will be competitive on price, the bank will pitch its other attributes to clients, including the ability to offer a full range of products.

From an organizational standpoint, Citi executives also believe they have the right framework in place to move forward.

Mr. Browning, 43, a polished Citicorp veteran, ran the bank's national corporate division before taking over the structured finance group.

Besides loan syndications, the structured finance group houses acquisition finance, junk bond underwriting, private placements, and asset-based finance.

Chemical already had a similar structure in place.

Strategic Alliance

A key feature of the setup is the close proximity of acquisition finance, which originates buyout-related loans, to syndications, which is charged with selling loans.

Given the thorny credit issues that are often associated with buyout loans, it is dangerous to make an underwriting commitment without first being certain that the credit can be successfully syndicated in the loan market.

A separate group at Citi is responsible for originating loans for investment-grade clients, but efforts have been made to beef up communications between that group and the loan syndication desk.

After several years of constant turmoil and changes in its leadership, the syndications operation still appears to be somewhat adrift.

Function Divided

When Richard Trask, the most recent head of syndications, was reassigned to another post in the February reorganization, his job was split in two.

Citi's explanation is that it wanted to elevate two separate but related functions within syndications - underwriting and structuring on the one hand and sales and trading on the other.

Both positions report directly to Mr. Browning.

But the decision to split the job in two reinforced the perception that Citi's loan syndication operation remains rudderless.

Moreover, Citi has yet to fill the sales and trading position. Underwriting and structuring is headed by Tim Conway, who also retains his previous responsibilities for running private placements.

Citi's search for a head of sales and trading is said to be focusing mainly on external candidates.

After several years of blood-letting, some of Citi's competitors say the bank needs to hire some high-powered talent from the outside.

Junk Bond Pro on Board

In a sign that Citi can still attract top performers, it recently hired Greg Martini, a highly regarded junk bond specialist who previously worked at Salomon Brothers Inc. and Bankers Trust New York Corp.

Meanwhile, Mr. Browning himself is something of a question mark. With little direct experience in the businesses he is now running, it remains to be seen whether he can revitalize them.

Todd Slotkin, a former senior Citi executive who once ran its buyout lending business, downplays Mr. Browning's inexperience, saying he is "very intelligent" and a "quick learn."

What's the Bull's Eye?

For his part, Mr. Browning dismisses the notion that Citi is hell-bent on regaining its former stature as the No. 1 bank in loan syndications, saying Citi's aim is to be in the top tier of "bulge bracket" banks.

Some of Citi's competitors, though, believe Mr. Browning will be under enormous pressure to restore Citi's former luster.

If he can't, look for another reorganization, they say.

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