Humberto M. Salomon, W’97, Citigroup Global Markets, Inc.
Humberto M. Salomon, W’97, loves his work and profession, and it shows. He is happy, congenial and fascinated by the challenge of managing risk better.
What are your key responsibilities?
I am the Portfolio Manager responsible for managing the exposures to media clients for Citi’s Institutional Clients Group, particularly those covered by our Global Corporate and Investment Bank. The subsectors include large media conglomerates, publishers, newspapers, broadcasters, and gaming or casino operators across the globe. I also am responsible for the regional risk management of exposures to U.S. and Canadian telecom, cable and satellite clients. My day-to-day work includes approving or declining credit requests, signing off on derivative trades for clients, reviewing documentation, conducting risk assessment, and stress testing the portfolio.
Another key aspect of the position requires being a subject matter expert for partners across the bank, including coverage, the loan syndicate desks, the leveraged finance desk, the securitization desk, rates, FX, legal and external regulators. Finally, but perhaps most importantly, I am a manager and mentor to analysts, associates and vice presidents who are building up their own risk assessment skills. This is one of my favorite parts of the role.
Citigroup is sensitive to the global markets. Is that also true for your sector?
Absolutely. The largest media conglomerates, while based in the U.S. or Western Europe, are global, and much of their recent growth has been in Asia, Eastern Europe and Latin America. Take, for example, the recent Iron Man 3 movie, which has been an enormous commercial success — people might be surprised to know that over two-thirds of its gross proceeds have come from outside of the United States. Because we take a long-term commitment, in most cases, we lead or co-lead large syndicated bank facilities, and we must understand the dynamics of all of the regions that our clients operate in. As an example, strong growth of gaming operations in Macau and Singapore has helped shield global gaming operations from the stress in Las Vegas and other domestic markets during the recent financial crisis. Many clients come to Citi because of our global reach — we do business in over 160 countries.
Do media companies, newspapers and gaming operators share a common risk profile?
The common tie is that all of these industries are cyclical and generally reliant on discretionary consumer spending to drive growth. Even the strongest company in any of these sectors will often feel some headwinds in tougher economic times. Those in industries with secular challenges, such as newspapers and directories, see their weaknesses magnified by cyclical factors. In fact, the ability to monetize content in a digital world is one of the biggest challenges facing my sectors.
How have approaches to and perspectives on risk changed over the past five years?
The core credit analysis has not changed much since I graduated from Wharton in 1997. You still start with the five C’s of credit: character, capacity, capital, conditions and collateral. The big difference in how the Street approaches risk management is in the bigger picture of portfolio analysis. A significant amount of my time is focused on portfolio stress testing — through the analysis of concentrations and correlation.
We have gotten better at breaking down silos and better communicating across the firm. Although my primary responsibility is to manage our exposure to media names, I find that I am regularly sharing my views on the industry with partners at Citi’s Commercial Bank and the Citi Private Bank, and with partners in other industries and geographies. And it works both ways — I want to talk to other portfolio managers who manage other cyclical industries. An example of thinking about correlations would be to consider automakers as they heavily influence the media sector through advertising.
Which risk tools do you deem most reliable?
On a company or deal level, management is first and foremost. I need to understand how they have historically dealt with banks and with other stakeholders, including their employees, communities, vendors and any government agency. How have they managed through adversity? Before I even get to the hard analysis — I must get comfortable with management’s character and judgment.
After that, I rely on the core fundamental analysis of the audited financial statements. My team scrutinizes the notes to those statements. This analysis often generates additional questions, which we review with management. We perform due diligence with company’s auditors, counsel and management, and often will send in our own team to affect a multiday on-site field exam
of the company’s operations. We also will sanity-check our views of credits by tracking external data, such as rating agency reports, and market indicators, such as bond spreads, equity prices, and behavior and pricing of credit default swaps.
In terms of the industry itself — we track the gauges for the particular space. For newspapers, we carefully track circulation trends. For media firms, we will track ad spend and ratings. For gaming companies, we will look at occupancy rates and gaming revenue trends, as well as regional indicators (table licenses in Macau or convention bookings in Las Vegas). We attend industry conferences and stay abreast of industry developments.
What was your path from Nicaragua to Wharton?
Interestingly — I am not even the only Nicaraguan Wharton alum on my floor here at Citigroup. Patti Guerra Heh, W’99, is a Director in our Healthcare Corporate and Investment Banking Group and sits across the floor from me. The tradition for Wharton alumni in my family started with my first cousin Roberto J. Teran Salomon, W’77, who was very dear to me and who, along with his father and siblings, were a constant source of advice and guidance in my formative years. I would also later work for Jaime J. Montealegre, W’73, another Nicaraguan Wharton alum who is one of the most respected and successful businessmen in all of Central America and who manages the Sigma Group. I suppose that I was introduced to risk management while at Sigma, as I was trading Russian/CIS securities during August of 1998, when Russia entered its financial crisis. That’s where I first learned that you cannot rely on statistical analysis of past behavior alone, to foretell the next crisis, because each one is different.
Anything you’d like to say to younger alumni?
I hope that readers thinking about their careers, give some thought to the risk management profession particularly those who enjoy getting into the nuts and bolts of things, what drives companies and industries, nuances of bond indentures and credit agreements, and having to do thoughtful valuations, etc. The work is challenging and exciting, because the risks confronting your clients, industries, markets and countries are always evolving.