MICHAEL CORBAT, Group CEO of US banking giant Citigroup Inc (Citi), says Malaysia is an important market for the group, not just from a local perspective but also in terms of its global presence.
“We think with its emerging middle class, growing wealth and banking population, Malaysia is a good demographic for us to continue to target,” Corbat says in an exclusive interview with The Edge.
He was in Kuala Lumpur recently on a one-day visit as part of an Asian tour that included India and Australia. This is Corbat’s third visit to Asia in 14 months, underlining the rising importance of the region, which is the group’s largest market outside the US.
“Growth is slower (in Asia) but India is still growing at 7.5%, Malaysia at 5%. There are many parts of the world that we operate in ... where they will give anything for 5% growth.
“Looking forward, there will be ups and downs, but we think Asia will outpace global growth in the foreseeable future; and we are well positioned (to take advantage of that),” says Corbat.
Given the importance of Asia, Citi has no plans to downsize its operations in the region where some European banks have divested their investment banking business. “No, we are not downsizing. We went into the crisis operating in 101 countries, and we came out of the crisis operating in 101 countries ... we are not a briefcase banker, flying in and out,” Corbat stresses.
In Malaysia, Corbat says Citi will continue to invest and grow. Apart from having a strong institutional and consumer banking business, Malaysia is important to Citi for its service centres, which employ some 6,400 employees.
Its Penang hub is the largest trade processing centre in the group globally, supporting its trade, cash management and commercial cards businesses in more than 100 countries and covering a network of 3,300 banks.
“We have chosen Malaysia as a centre for excellence to do a number of things on behalf of not just our regional but also our global franchise. If you look at the quality of the workforce that we attract, we think it’s a terrific place to continue to invest in.”
Like in all its geographies, Citi is focusing on an urban-based strategy. In Malaysia, even though it does not have a big branch network, with most of its branches in urban areas, the bank has a high penetration rate and is still a market leader in credit cards despite the intense competition.
Six years after the 2008 global financial crisis (GFC) exposed its weaknesses, Citi has emerged smaller, simpler, safer and stronger, and hence, is well positioned to take advantage of the region’s potential, according to Corbat.
He is not one who believes that bigger is better; rather he thinks better is better. “Before the crisis, there was this belief globally that bigger was better. Today, better is better.”
This is why, Citi, the US’ third largest banking group by assets, has gone back to its roots — that of being a bank. It is not the entity that entered, endured or emerged from the financial crisis. Fundamentally, it has become a very different institution, he says.
By the end of 2014, non-core assets at Citi Holdings had been reduced by more than US$700 billion (RM2.5 trillion), making up only 5% of Citi’s balance sheet, down from a peak of 40%. Regulatory capital was at US$137 billion, where some RM31 billion had been generated in the last two years.
Citi’s share price has also recovered to around US$53.31, from a trough of below US$1 at the height of the GFC.
Industry observers say investor perception of big US banking groups is still one of caution but with Citi’s stronger fundamentals, reduced risks and new management, they believe that things can only improve from here.
Corbat, who joined Citi in 1983 as a fresh graduate, is no stranger to financial storms, as he has seen several crises come and go over the last three decades.
He rose from the ranks, having undergone at least 15 career paths within the banking group before reaching the top. Corbat in fact played a big role in helping Citi to downsize prior to taking the driver’s seat.
At the start of 2012, when he was CEO of Citi Holdings, where the banking group’s non-core businesses are parked, he helped divest more than US$500 billion of these assets, freeing up capital for Citi to focus on its banking operations.
In October 2012, Corbat took the helm from Vikram Pandit amid difficult times, even though the group was back in the black. Today, Citi’s restructuring phase is over; what needs to be done has been done, Corbat says.
As a financial institution, after six years of restructuring and riding out some difficult times, Citi is where it wants to be. “We went into the crisis being a bank, an asset manager, an insurance company, a private equity and hedge fund. Today, we are global and we are a bank ... The reason I don’t say it’s totally complete is because we don’t have final regulation.”
Among other things, the group improved its information systems, reporting and risk-management procedures.
Has the “new” Citi been put to the test? “Citi successfully navigated events, such as the sovereign debt crisis in Europe and the Arab Spring, as we manage today the impact of geopolitical risks and the recent declines in energy prices on our businesses,” Corbat says.
This article first appeared in The Edge Malaysia Weekly, on May 11 - 17, 2015.
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