Is Citi putting its money where its mouth is in Asia?
With consumer business sales mostly finalized in Asia, attention turns now to Jane Fraser’s commitment to devote the proceeds to growth in the region. We are seeing early signs.
Since Citi announced the sale of its consumer businesses across most of Asia, Euromoney has held a consistent line: if you think you can do better with the capital elsewhere in Asia, fine, but we look forward to seeing it.
Is that now happening? Earlier this month, Citi Commercial Bank Asia Pacific, the bit that services mid-sized companies and emerging corporates, announced it would hire almost 350 people, including 200 commercial bankers, during the next three years to accelerate growth in the region. Most of them will be in China, Hong Kong, India and Singapore.
This is a sensible move, following the money. In 2021, Citi saw a more than 70% increase in capital-market origination revenue from this client base in Asia-Pacific, as emerging corporates enter new markets and create global supply chains.
Fraser cares deeply about narrowing the valuation gap versus US peers … Nothing else in Asia should be sacrificed on the altar of that intention
It chimes with what chief executive Jane Fraser has been articulating as the strategic direction of the bank. At the closely watched investor day on March 2, Fraser said she wants Citi to be the preeminent banking partner for institutions with cross-border needs, and a global leader in wealth management.
Citi is in some sense a throwback, opening its doors in 95 markets every day and doing business in 160. It is less of a throwback now that it has ditched much of its consumer operations, but from the outset of that strategy it has been keen to stress that it is not surrendering its banking licence in any of those Asian markets, neither closing down. It still intends to be pretty much everywhere that matters.
The idea, then, is to use the global network in a slightly more targeted fashion, deploying assets on narrower themes, which is what all this hiring in the commercial bank is about. Citi’s always been a banker for the big guys – it has got 90% of the Fortune 500 on its client list in the region – but the growth now is in a smaller segment, from fintechs (it banks Gojek and Tokopedia, for example) to investor financial services clients.
“Had you heard of Gojek a decade ago?” asks one Citi insider. “The Citi of old would have missed that client.” It might also have missed Zomato and Paytm, Indian tech clients whose IPOs Citi handled last year – with considerably better results in the former than the latter.
So, that’s commercial banking, but how about wealth?
Wealth is a tricky field to define in Asia: there is no more difficult award to decide upon than Asia’s best bank for wealth management, because there are about five different styles from the big-asset Swiss to the smaller pure plays, the regional houses that link the business to entrepreneurial banking, the Americans focusing only on the high end, and those that consider mass affluent to be part of the mix.
But by any metric, Citi is already in the conversation here. It’s a top three regional wealth manager, has several hundred thousand wealth clients in Asia and claims to bank one third of the region’s billionaires. Two of Citi’s four global wealth hubs are in Asia and the ambition, announced last April, is to grow client assets by more than $150 billion by 2025, adding 2,300 staff, including 1,100 relationship managers, in the region.
Even before deploying any of the funds from the consumer sales, which will still mostly take a year to complete, the bank says it added 14,000 new wealth clients in Asia in 2021 and hired several hundred private bankers and relationship managers in Hong Kong and Singapore. It added $12 billion net new money here in 2021.
There is still a lingering sense that selling some of those consumer businesses was a misstep: that an Indonesia business, for example, is surely filled with mid-ranking consumers who will gravitate to become exactly the high-net-worth clients Citi is looking for in the first place.
But Citi, in terms of the sheer scale and reach of the place, has enduring advantages, provided Fraser doesn’t decide they are any kind of drag on her return on equity targets. Asia chief Peter Babej has a lot of strings to his bow.
Citi has a powerful markets business in Asia, which saw more than $100 billion of FX flows with wealth clients in the last 12 months; it is a cash management leader in the region with strength in trade finance and custody, too. Its investment bank is transformed and has raised more than $200 billion for Asia clients from global capital markets in 2021 while advising on over $100 billion of M&A.
All of this, in theory, links up: the wealth client comes to the bank for advisory services, for custody, for institutional services for the businesses that generated their wealth. I say ‘in theory’ for there’s nothing so nebulous as the idea of the seamless bank: getting bankers in different fields to work together is a lifetime’s work.
Fraser cares deeply about narrowing the valuation gap versus US peers. Citi’s PE ratio is 5.51, JPMorgan 9.2, Bank of America 12.2. Nothing else in Asia should be sacrificed on the altar of that intention. Instead, Asia should be the spearhead of making it happen.