Citi’s big bet on Asian cities

Published: 24/03/2016 at 04:00 AM

Newspaper section: Business

Since taking over as chief executive of Citigroup in 2012, Michael Corbat has aimed to streamline the global financial services giant, with a focus on strong execution, ethical standards and creating shareholder value. He arrives in Thailand this week in the first visit to the country by a Citigroup chief executive in nearly two decades.

Michael Corbat, chief executive of Citigroup, discusses banking trends during an address last October at the Economic Club in Washington.

What is the purpose of this visit?

I am in Thailand as part of a broader trip to Asean to meet with our clients, regulators and staff to discuss how Citi can further contribute to economic progress for this important region after the advent of the Asean Economic Community (AEC) in 2015.

Thailand has a leadership role to play in the AEC, and is an important market for us in Asean, attracting significant investment and trade flows from our global clients. We also have a sizeable consumer presence here in which we continue to invest for growth.

Since becoming chief executive, how has Citi changed strategy?

Let’s remember that we have restructured the bank significantly since the crisis. We have become a simpler, smaller, safer and stronger institution. In many ways, we have gone back to our roots and are focused on providing banking services to consumers and institutions.

Our scale and global network allows us to support the growth of multinational companies, facilitate trade and capital flows. This supports investment and job growth.

In the emerging markets, that means domestic corporate champions or subsidiaries of large multinationals. Our global footprint in over 100 countries remains an important differentiator and we bank Thai companies in many countries across the world as well as the majority of the Fortune 500 doing business here in Thailand and across Asia. In consumer banking, the strategy revolves around high credit quality and global-minded consumers in key urban centres such as Bangkok, with an emphasis on innovation and digital banking. We believe it’s the right strategy for Citi, and one which will ultimately demonstrate itself in better performance relative to the overall market.

At the same time, we have been steadily divesting assets and businesses which don’t fit our strategy. Citi Holdings once represented 40% of our balance sheet. We have since completed more than 60 divestitures of businesses, helping reduce Citi Holdings by US$800 billion. These non‐core assets now represent only 4% of Citi’s total balance sheet.

What progress have you made?

As 2015 showed we have significantly improved both the quality and consistency of our earnings — the $17.1 billion we generated in net income was the highest since 2006, when our company was very different in terms of headcount, footprint, mix of businesses and assets.

We have worked hard to transform our company and the changes have put us in a strong position to navigate the current environment, and our capital and liquidity are among the highest in the industry.

The other side of the coin is to make sure we allocate finite resources to where we can get the best returns, including some opportunities here in Thailand.

What are your views on Asia and trends in the region now and in the next five years?

Asia, including Asean, is a dynamic region that presents many opportunities.

In terms of our strategy, Citi points to the three defining secular trends of our time: globalisation, urbanisation and digitisation. The region’s rising economic and political influence puts it at the heart of these global trends. It has the highest regional GDP growth worldwide and accounts for 60% of the world’s population, which includes a massive and growing emerging middle class that adapts quickly to new technology, in particular digital and mobile channels. This presents opportunities for further growth in our consumer business across Asia in areas like wealth management and credit cards.

It’s also home to many of the world’s fastest-growing and successful companies — many that are our long-standing clients. These trends play to our strengths with Citi’s global network able to support companies across the world.

We are also increasingly emphasising our presence in cities, including here in Bangkok. We have a strategy to focus on the world’s top cities where economists estimate that as much of two-thirds of future growth will be generated. These are the global commercial hubs, indispensable from both an institutional and consumer perspective. Urbanisation is one pillar of our strategy but it helps drive the other two: globalisation means above the connectivity experienced between cities, more so than countries; and digitisation is created and incubated in urban centres even as it transforms cities into evermore sophisticated hubs of business activity, like here in Bangkok.

How is Asia a base for growth at Citi and how important is Asia, and Thailand, for future growth?

We have been in Asia-Pacific for more than 110 years, in Thailand for almost 50, and in countries such as China and India 114 years. Citi’s key advantages are its global network and legacy in Asia, which gives us long-standing, deep client relationships. Asia really is in the DNA and roots of our company.

Asia-Pacific is a significant contributor generating around a fifth of our global profit and is our largest contributor outside North America. There continues to be growth opportunities with the region’s growth forecast at around 5%, significantly higher than in many other parts of the world.

Looking forward, there will always be ups and downs, but we think Asia will outpace global growth in the foreseeable future and we are well positioned. We have a strong reputation, a good history, scale and presence, and we want to continue to build on each of these.

In Thailand, our strategy is to make sure we continue to support our multinational corporate clients and help local companies grow globally, supporting the champions of tomorrow. Citi’s consumer banking and wealth management businesses are also market leaders in Thailand.

I am just as proud of our commitment to responsible finance in the country — it is how we define our business.

Through the Citi Foundation in Thailand, we have invested over $2.5 million in recent years to support the economic progress and improvement of community lives. We work with non-governmental organisations to provide financial education for women at risk to help them prepare for better futures, and we equip youths with entrepreneurship skills for economic opportunities.

Our capabilities create an obligation to act responsibly, do everything possible to create the best outcomes, and prudently manage risk. When we do these things well, we make a positive financial and social impact in the communities we serve and show what a global bank can do. I am excited by the prospects for further growth that we see in this region, and remain committed to invest further in Asia and Thailand.

Writer: Chiratas Nivatpumin, Managing Editor