Citi’s Aristeguieta makes his mark in Asia

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By:
Chris Wright
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Five quarters of profit after years of flat performance; consumer revamp gains traction.

Francisco Aristeguieta, the Asia Pacific chief executive of Citigroup, says the bank is “probably 40% into the journey” of its 2020 vision for Asia. But it appears to be already bearing fruit.

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Francisco Aristeguieta,
Citigroup

After several years of disappointing performance, Citi in Asia has delivered five consecutive quarters of increasingly broad-based growth. 

Overall third-quarter revenues, at $3.75 billion, were up 6% year on year, and net income, at $969 million, up 12%. Within that, the global consumer banking division is up 15% year on year for net income in the third quarter, and the institutional clients group, containing the corporate bank, by 11%.

Aristeguieta says that of the initiatives that have taken place in the two-and-a-half years since he became chief in June 2015, one of the most important has been the revamp of the consumer banking business. 

“The definition of our consumer strategy was on the basis of relevance,” he says. “Can we be relevant to our target market in 17 different markets? That is the fundamental question we are solving.”

A large part of this process has involved digitization: 37% of card clients in the region and 40% of personal loans are now acquired digitally, which Aristeguieta says manifests itself in better profitability and return on equity than analogue-acquired clients. 

Citi has built numerous digital partnerships from Alipay and WeChat in China, to Grab and Lazada in Singapore and Line in Thailand. Aristeguieta says that spreading the brand through so many other businesses is not problematic. 

“We are very disciplined in the boundaries we set ourselves,” in terms of the relevance of partners, he says. “If you lose discipline over that, your controls are weakened and it is a slippery slope down from there.”

Key initiative

Another key initiative has been the closure of retail branches and the reallocation of resources to wealth management. Aristeguieta says the bank has 42% fewer branches in Asia than when he joined. It now focuses on 69 wealth hubs across Asia, each of them filled with relationship managers. 

“Productivity is getting significantly higher: high teens growth,” he says. “Client engagement is very powerful.”

A third consumer priority will be data. Aristeguieta says that data on Citi’s 16 million consumer customers in the region has been pooled from 12,000 locations in Asia to a single ‘data lake’, which is now being mined for information – an initiative he believes will also help bring the consumer and institutional banks closer together. 

Consumer overall is performing better than it has for some time. 

“We are growing this business by 5% this year, for the first time in a long time,” he says, referring not to full-year numbers but the 5% growth in consumer revenues for the first nine months of 2017. 

“The primary objective was always moving the top line. You can always cut expenses, but that doesn’t give you higher returns over time.”

While many areas of the institutional bank, such as transaction banking and markets, have not required revolution, one element of the corporate bank has been revised under Gerry Keefe, who was made overall head of corporate banking for Asia Pacific in 2016. 

Keefe was mandated to reorganize the fragmented corporate bank into a more integrated structure. In particular, Citi has sought to realign itself around changing trade flows. The highest growth areas are in seven intra-Asian trade corridors the bank has identified, such as China-Taiwan, Korea-Vietnam and Japan-Asean. 

“It’s not that complex,” Aristeguieta says. “I had people at both ends of those corridors, but we were not connecting them effectively. So we began to move people around, to put Korean colleagues in Vietnam.” 

He says the corridors are “moving at low teens. Not just volumes – real, incremental revenue.”

BRI driver

China’s Belt and Road Initiative is also expected to be a driver, with Citi serving clients in 58 of 65 BRI countries.

Citi is at pains to point out that it is truly diversified in Asia, with no one market contributing more than 12% of earnings. But Aristeguieta acknowledges that the bank has had work to do in China, which he says was “the last market to reorganize” in terms of getting the corporate and investment bank to work together. 

“Getting China right is by far the biggest [challenge],” he says, referring to the investment bank. “We haven’t gotten China right sustainably for a long period of time.”

The appointment of Guorong Jiang, hired from UBS in June, as head of corporate and investment banking in China is seen as key in getting the division on the right track. Aristeguieta says the bank is “having the best year in China in terms of transactions led and volume”. 

Highlights have included nine of the 12 China tech IPOs to list in Hong Kong and the US in 2017; key roles for Alibaba and Ant Financial, including the $7 billion bond deal and bid for Moneygram; and a role on the sovereign’s first dollar bond issue since 2004. 

“If this year is a first step, it is a very encouraging first step,” says Aristeguieta.