Now, hear us out. A year ago, we were griping about Citi’s decision to sell consumer businesses in a clutch of Asian markets. The only way it made sense, we argued, was if Citi put its money where its mouth is: deployed the freed capital into its wealth and institutional businesses in Asia and doubled down on that with tangible action, rather than the proceeds just drifting into some vague balance-sheet objective.
Here’s the thing: Citi delivered. With the strategy set, it achieved clean and lucrative exits from every Asian market it wished to depart, it poured assets and personnel into a reshaped wealth business and it delivered a record year in key institutional segments including investment banking and in treasury.
“The last couple of years have been defining for Citi Asia,” says Peter Babej, Asia-Pacific chief executive. “Our strategic initiatives, including the win-in-wealth campaign and the consumer divestitures that Jane [Fraser, Citi CEO] announced in early 2021, have progressed exceptionally well.”
Let’s look first at the exits. The sales of businesses to NAB in Australia, Union Bank in the Philippines, UOB in Malaysia, Thailand, Vietnam and Indonesia, DBS in Taiwan and Axis in India were all good deals.
In each case, Citi succeeded in selling the entire business rather than being left with irksome leftovers to deal with. They went to good buyers for whom they were a logical strategic fit (and with no obvious reason for regulatory intervention). They freed a lot of assets and came with solid premia, and even in markets such as South Korea where it was better to just write down the business than sell it, the steps were decisive.
There also appears to be some merit in Citi’s theory that it can do what it really needs to do in consumer through hubs in Singapore and Hong Kong, which are also two of the four global wealth hubs. We stand by our contention that Citi has sold some of its future wealth client base in emerging markets such as Indonesia.
But if we’re going to take that position, we also need to look at what Citi’s done to boost its wealth business, the key part of Fraser’s strategic overhaul.
Plenty, is the answer. Citi’s billboard of an ambition is to add $150 billion in client assets in Asia by 2025, and it achieved about $13.5 billion of that during our review period, a decent start in a year of considerable volatility. Better still, it has positioned itself in a way to make those ambitions realistic: the wealth business hired several hundred people in Asia over the last year, part of its commitment to hire 2,300 staff, including 1,100 relationship managers. Consequently, Citi gained 14,000 new wealth clients in Asia last year.
All of this is taking place under the umbrella of Citi Global Wealth, which was formed in 2021 to unify wealth management teams across Citi. The idea of this is to serve wealth clients across the continuum from affluent to ultra-high net-worth. Citi is already a top-three wealth player in Asia by assets; by unifying its teams it hopes to elevate that position and make sure clients stay with Citi as they grow in affluence.
It will take time to bed this in, but the early numbers are very strong. Citi Global Wealth recorded $7.5 billion of global revenues in 2021 and over 30% of it came from Asia Pacific.
Then there’s institutional. There was a danger of slippage amid the questions of commitment that arose with the retail exits, but it didn’t happen.
Citi’s renewed strength in investment banking is reflected in our regional financing award. It is now the bank with the greatest across-the-board capital-raising strength from equity to debt capital markets, lending and structured finance. Jan Metzger – a man with so much energy he even managed to sound invigorated while conducting his pitch call suffering from Covid in an Indian hotel room – runs a team with palpable momentum and big ideas. When you ask competitors who has made the most progress in investment banking in the last five years, they pretty much all say Citi. Colin Banfield’s reliably excellent advisory practice helps.
Citi also thrived in its flow businesses, and in treasury and trade, it added 7,500 corporate digital accounts on the back of its Citi Direct model, while also delivering a host of new products and helping clients navigate their way out of Covid. Citi lifts our transaction services award in Asia this year too.
“We have announced several attractive transactions with strong partners, delivering excellent paths forward for our consumer colleagues,” says Babej. “We are investing and growing across institutional and wealth businesses in the region, and growing both mind and market share with clients.”
Through a challenging macro environment, we continue to execute with focus, intensity and passion
Peter Babej
In commercial banking, Citi’s Asia full-year revenues topped the billion-dollar mark for the first time. It was helped in this by capital markets activity from commercial banking clients, which brings us to another important point: Citi bankers from different disciplines appear to be talking to each other. You can see it in the $100 billion of FX flows for wealth clients, and in the more than 100 referrals from the private bank to the broader institutional business during our review period. Investment banking, markets and TTS heads routinely team up on client calls now.
And that shows in the hard numbers. Citi recorded $10.2 billion of Asia revenues in 2021 and net income of $3.6 billion: highly profitable despite the exits and, as we will see, a better quality of earnings.
Globally, Citi’s return on tangible common equity was 13.4% in 2021; Asia’s was 31.4%. It is demonstrable, therefore, that Asia’s performance has been accretive to Citi overall.
Covid has hit Asia, and in particular China, harder and for longer than any other world region, yet since 2020 Citi has added over $150 million in revenues in Asia despite a crippling slowdown that has been especially obtuse for the largest US bank in China.
Assets and deposits also grew, by 6.5% and 10% respectively, demonstrating confidence from wealth and institutional clients.
“Their exit was the right call,” says the chief executive of a rival Asian bank. “You have to focus on what you are best at, and a consumer presence in every market no longer fits that description. They were right to sell.”
Finally, last year we rewarded Citi with our corporate responsibility award largely because of its efforts in youth employment, and it was important to us that the bank did what it said it would do. It did, hiring 5,500 people through this programme during our review period.
All told, of the $200 billion Citi raised from capital markets for Asian clients during those dates, around $30 billion was environmental, social and governance-related. The bank also succeeded in its target of 41% female employees between the ranks of assistant vice-president and managing director; it promoted 18 women to MD in Asia in the latest round. Women run wealth, markets, operations and technology, China, Hong Kong and South Korea.
“Through a challenging macro environment, we continue to execute with focus, intensity and passion,” says Babej. “And as we celebrate 120 years of Citi history in this dynamic region, we do so with the highest confidence and commitment to the future of Asia.”
