European business is experiencing a 'sense of greater calm': Citigroup's Philip Drury

Europe is beginning to reopen, with officials proposing an $800 billion recovery plan. Yahoo Finance’s Alexis Christoforous and Brian Sozzi discuss with Citigroup Head of EMEA Banking & Credit Markets Philip Drury.

Video Transcript

ALEXIS CHRISTOPHOROUS: Phillip, good to have you on the show again. So tell us what you're hearing from clients right now. Are businesses looking to make deals in this environment?

PHILIP DRURY: Thanks for having me on the show. It's a great pleasure to be here. Look, I think that you're seeing in the reaction of the equity markets and the credit markets there is a sense of greater calm. We are now 10 weeks in terms of working from home at various levels across Europe. In the first two to three weeks of this crisis, it was very much a case of near-term liquidity needs from our clients and bank-led liquidity.

We soon, though, saw a constructive response from central governments in terms of boosting liquidity, and the capital markets opened up quite sharply following on the heels from the US starting in the investment-grade debt capital markets area and now leading into a series of equity recapitalizations. So it's great that the public capital markets are relieving pressures from bank lending.

And I think as we start to focus on transitioning and coming back online into the workplace, that is giving a sense of optimism to the market. I think it's too soon to call it, though. And corporates are still focused on the near-term next quarter or two quarters out, and it's going to be some time before we get a greater sense of outlook to say that we're through this and have a greater level of confidence around projections over the next 12 months.

ALEXIS CHRISTOPHOROUS: Speaking of coming back to the office, we're hearing reports that Citi may start bringing some staff back to its London offices as early as next week. What can you tell us about that, Philip?

PHILIP DRURY: I won't comment specifically other than to say and to echo the words of Jane Fraser, which is that we're focused on data, not dates. We're physically present in 55 countries across Europe, Middle East, and Africa, so we've by far got the largest regional presence of any universal banks. And each country is at a different stage of transition.

So I do-- we are very focused on all of our premises around EMEA, and we're putting in place measures in order to ensure that we've got a comfortable environment and focused on social distancing when employees come back to the office. I do think we'll start a phased approach relatively soon, but we're going to make very sure that it follows guideline on social distancing and that our employees are comfortable in that environment.

One thing I would say about banking, capital markets, and advisory-- we are pretty much all working from home right now, have been from the last 10 weeks. I'm at home at the moment in Surrey. And we've been able to support our clients very well through the use of technology.

BRIAN SOZZI: Phillip, just going back on the M&A front, do you think-- clearly there's going to be M&A activity, whether it's later this year or 2021. Do you think EU officials want to see the creation of these national champions, these really big companies that, in the future, might be able to withstand, at least better, a pandemic or a health crisis like the one we've been going through?

PHILIP DRURY: Yeah, look, I think one thing that will come-- a lot will come out of COVID. Lord Hague, one of our senior advisors, has talked about this period of time being the great accelerator on a number of things that we were focused on in any event coming into COVID, such as technology ecosystems and such as sustainability and transition.

But this concept of European champion as well, we believe, could well accelerate on the heels of COVID. One obvious takeaway is the reluctance for global interdependence and the need within certain regions to have champions through the vertical supply chain. So we do think we'll see consolidation and integration within countries, and we also believe that we may well see tie-ups intra-region as well to have companies that can go toe to toe with Asian peers and also America's peers.

ALEXIS CHRISTOPHOROUS: All right. Philip Drury of Citigroup, thanks so much. Always a pleasure. Be well.

PHILIP DRURY: Thank you. Thank you very much. You too.