This article first appeared in The Edge Malaysia Weekly on July 31, 2023 - August 6, 2023
SINCE becoming CEO of Citi Malaysia a short three months ago, Vikram Singh is convinced that Malaysia presents a large opportunity of growth for the international banking group.
“I am optimistic about the prospects in Malaysia and I am encouraged by what we see, in terms of how the business is growing locally, what the rating agencies are saying and the interest from our global clients about the country. I believe there is a large wallet out there and huge opportunities of growth for supporting economic growth in Malaysia,” Vikram tells The Edge in his maiden interview as CEO.
Notably, Citi Malaysia concluded the divestment of its retail banking and consumer credit card business to United Overseas Bank (UOB) Malaysia last November and is now firing on all cylinders across its remaining business segments in the country, being the institutional clients group (ICG) and Citi solutions centres (CSC), focusing on delivering consistent and sustainable growth.
Putting its money where its mouth is, the bank will expand its commercial banking business, increasing headcount by 30% in the next 12 months. It is also looking to expand the coverage of its CSC beyond the 50 countries it currently serves as well as seed new skills into the market.
From January last year to May this year, Citi Malaysia managed to increase the number of new commercial banking business clients by 131 accounts. However, Vikram declines to disclose the targeted number of new customer acquisitions this year. “If I’m growing the headcount by 30% in the commercial banking business, I am expecting new client acquisitions to grow in the double digits over the course of two to three years,” he says.
Vikram also adds that the commercial banking business will help to drive loan growth for Citi Malaysia this year, with the 30% growth in headcount for that business segment expected to drive new customer acquisition.
The bank expects single-digit loan growth this year, on the back of supporting existing and new clients. Vikram believes that the growth in the commercial banking business is integral to Citi Malaysia’s strategy.
Apart from the commercial banking business, Citi Malaysia offers a full range of services for institutions under its ICG segment, which includes services, such as treasury and trade solutions as well as securities; markets, dealing with the trading floor; and banking, which involves services such as capital markets and advisory, corporate and commercial banking.
Citi Malaysia’s solutions centre in Kuala Lumpur hosts several regional hubs, including anti-money laundering (AML), securities services operations and Know-Your-Customer business support unit. Meanwhile, the CSC in Penang provides end-to-end operational support across treasury and trade solution products for Citigroup and stands as one of the largest trade processing hubs for the banking group, supporting over 56 countries.
Currently, Citi Malaysia has 4,000 employees across its ICG and CSC businesses. The CSC in Kuala Lumpur employs more than 2,300 people while the CSC in Penang has a workforce of 1,200. This leaves about 500 employees in the ICG.
That being said, without the contribution from the retail banking and credit card business this year, what will earnings look like? Its financial performance for the first quarter of the financial year ending Dec 31, 2023 (1QFY2023) could provide a hint. Citibank Bhd recorded a net profit of RM195.8 million, with net interest income for the quarter increasing nearly 80% to RM177 million from a year ago and other operating income growing about 2.5 times to RM257 million. The lift in its non-interest income stemmed from gains from derivatives (RM291 million) and a category identified as “others” (RM103 million).
“Earnings from the continuing business are expected to grow by double digits this year. This is by virtue of serving our clients across the entire set of their requirements,” says Vikram, adding that the growth has already exceeded the internal target of the bank.
Globally, Citigroup is aiming for a medium-term return on tangible common equity of 11% to 12%.
In FY2022, Citibank recorded a net profit of RM990.6 million. This included the discontinued operations of its retail banking and credit card business, which contributed about RM570 million to net profit. Continuing operations contributed about RM419 million, which was double the previous year’s RM139 million. It achieved a return on equity of 19.6% for that year.
Interestingly, Vikram says that during his time in Citi Singapore, prior to joining Citi Malaysia, and handling regional offices of multinational corporations, he noticed an increasing flow of MNCs moving into Malaysia to set up regional treasury centres or shared services centres.
“I believe that foreign direct investments will continue to flow into Malaysia. Increasingly, across our network of 95 direct presence countries, global multinational clients are noticing and showing increased interest in Malaysia. There is considerable interest to set up regional treasury and shared services centres in Malaysia,” he opines.
He believes that this is largely due to the ease of doing business in the country and says that MNCs are picking up on that. He adds that Malaysia moving up on the 2023 IMD World Competitiveness Index by five notches to 27th place backs his conviction that Malaysia is a compelling investment destination not just for global clients but also for Citigroup itself.
While Malaysia’s population may be small relative to many of its neighbours in the region, Citi Malaysia is seen as an important market for the global banking group.
“Malaysia is the second largest business in Asean for Citi. In the South Asia and Asean cluster, it is the third largest in terms of earnings before interest and tax (EBIT). Three thousand five hundred of our employees provide some of the most critical functions for Citi globally, which involves trillions of US dollars in cash processing and billions in trade and securities services,” says Vikram.
He adds that Citi Malaysia is a leader in Asean in terms of the size of its banking business. “This year, we have recorded double-digit growth for the first half on the back of strong growth last year. The market continues to grow and the share of wallet growth is also evident.”
While many would think that banking is a challenging industry to be in these days, Vikram prefers to take the view that the industry is becoming more interesting.
“We have to play to our strengths and keep our ears very close to the clients’ current and emerging priorities. Our core competitive advantage is our network, the depth of our solutions offered locally and the seamless, connected and adaptable coverage we provide to our clients. Citi banks 92% of the global Fortune 500 companies,” he says.
Citi’s local presence in regional markets and a wide global network across 95 countries in itself provides a competitive advantage for its clients, says Vikram, adding that the local insights Citi brings to its global clients is something that is appreciated by them.
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