Citi made a strong statement about its commitment to the TTS business last year when CEO of institutional clients group (ICG) James Forese gave the opening address at Sibos. It was only the second time he had attended the conference.
This strategic elevation of the TTS unit at Citi is unsurprising, considering it is in rude financial health – reporting revenues of $7.8 billion in 2014.
|Our approach is to be |
the lead bank for our clients around the
world in response to
the trend of globalization and digitization
Sultan says: “Last year, TTS revenues represented approximately 24% of the total ICG revenues and 10% of total Citi revenues. Because of its strong operating efficiency ratio, TTS makes a significant margin contribution to Citi overall.”
These changes came as a result of some restructuring within the bank. While it realized the need to adapt to changing corporate needs post-2008, the previous operating models internally needed to be reassessed.
Sultan, explaining the evolution of TS at the bank, says: “Post-crisis, Citi looked at the issues facing itself and the industry, and recognized the need to rethinking the operating and business model.
"In this regard, we decided to focus on the businesses that are core and strategically relevant for our clients in the mid to long-term. Accordingly, there were some business areas we moved away from, including the subprime mortgages portfolio.”
He adds: “By letting go of those assets that were not strategically relevant to our business model, Citi became simpler and more focused. The assets which were not core or strategic were moved to Citi Holdings and are being progressively wound down.”
Sultan, appointed in June 2011, says a priority for the industry is addressing the lack of borrowing and liquidity options for mid-market corporates, adding: “Policymakers are concerned about access to funding for the small and medium-sized enterprises (SMEs) and the mid-market enterprises (MMEs).
Multinational corporations have always had preferential access to funding, but the SMEs are an important segment of the economy and therefore this segment’s access to economical financing and liquidity is critical for the growth of an economy.
Through supplier financing, larger companies take on the burden of risk of open-account transactions that would potentially leave parts of their supply chain without crucial financing, Sultan says. The bank now has more than 60,000 suppliers signed up, operating in over 80 countries, with more than 50,000 suppliers based in the Asia region.
Sultan says: “Our supplier finance proposition was developed to inject liquidity into the ecosystem. For many of our large industrial, retail and infrastructure clients, by Citi taking on the risk on the credit rating of the client, we are able to lend into the smaller suppliers in their supply chain and keep a level of predictable liquidity and financing coming through.”
After the financial crisis, Citi’s TTS business sought, among other things, to help corporates maximize the efficiency of their cash-flows. Where this effort resulted in a reduction in third-party financing, banks, in turn, further beefed up their advisory services to maintain their relevance to corporates.
Sultan says: “The TTS business structured and developed primary solutions for clients to address the key issues in the aftermath of the financial crisis. For example, the working capital management solutions we deliver help our clients to be more efficient, generating liquidity and financing from their working capital and reducing their reliance on third-party financing.”
|SME financing: special focus|
Citi responded to changing market trends in favour of digitalization by developing the CitiDirect BE apps for desktop, mobile and, most recently, tablet devices. The app allows users to schedule transactions and make payments via their device of choice, and in any location.
Sultan says: “We have rolled out an enhanced version of our treasury diagnostics tool. We launched our CitiDirect BE tablet and BE mobile services a couple of years ago and, based on client needs and feedback, we are continuously working on launching enhanced versions.”
The TTS business is gaining from increased focus internally, and from the client base.
“At Citi, TTS business is core to our strategy and business model, as it underpins our global network and our client relationships across the globe," says Sultan. "Our approach is to be the lead bank for our clients around the world in response to the trend of globalization and digitization.
“This business has evolved significantly over the last few years and has gone up the value chain inside our corporate clients. It is now an important part of global treasurers, CFO and CEO agendas.”