Citi gains from Asean's rapid urbanisation as middle class grows

Singapore

CITI's Asean business continues to grow nicely as the bank plays well into the region's rapid urbanisation propelled by an expanding middle class, according to Amol Gupte, Citi's head of Asean.

"We are seeing great traction in the main businesses of wealth management, cards, flows in corporate and investment banking, and mergers and acquisition advisory," he told The Business Times in his first press interview since moving to Singapore about a year ago. "Asean has standout results."

"Globality is our single biggest competitive advantage - and this is played across the consumer and institutional businesses," he said. "I believe globalisation is here to stay." He pointed out that the bank's well-connected global network of 100 markets is helping to drive its business in Asean, a vibrant region with a rapidly growing middle class expected to more than double to 400 million in 2020 from 190 million in 2012.

Indonesia, Malaysia, Vietnam and the Philippines are forecast to grow between 4 per cent and 7 per cent in 2017. For Thailand, growth is expected at 3.3 per cent in 2017 while it's 1.5 per cent for Singapore. Mr Gupte is Citi country officer for Singapore, and is also responsible for Indonesia, Malaysia, the Philippines, Vietnam and Thailand. Citi is in 17 markets in Asia and seven of these markets contribute US$1 billion in revenues each.

The fourth largest US bank, Citi posted Q1 2017 global revenue of US$18.1 billion, up 3 per cent year on year (y-o-y), and a net income of US$4.1 billion, a 17 per cent increase yoy. Citi Asia Q1 2017 revenue was US$3.4 billion, up one per cent y-o-y. Asean business was up a stronger 8 per cent in Q1 2017 from a year ago.

For 2016 overall, Citi Asia generated revenues of US$13.2 billion and net income of US$3.3 billion. Citi Asia contributes about one-third to the group overall, and is the largest contributor to Citi's global revenue and net income outside North America. Asean contributes about 30 per cent to Asia revenue while Singapore accounts for about 40 per cent of Asean revenue.

Many Asean companies are raising capital to support their burgeoning business and Citi is helping them with their equity and debt raising. In the last three years, Citi helped raise US$50 billion for Asean companies and advised on over US$25 billion of mergers and acquisitions involving Asean companies. Its notable deals last year included acting as the sole financial adviser to Neptune Orient Lines on its sale to CMA CGM for US$5 billion. It was also the financial adviser to Singapore's sovereign wealth fund GIC in its acquisition of 19.9 per cent interest in ITC Holdings Corp in a deal worth US$1.2 billion.

E-commerce has been the fastest-growing client sector for Citi's treasury and trade solutions business in Asean in the last two to three years and the bank expects double-digit revenue growth in the next three years, said Mr Gupte, adding that some 18 months ago, there was a shift in strategy as Citi stepped up digitalisation to drive revenues.

In the past, banks used to argue with regulators over expanding their branch networks but today that has changed, given consumers' use of their mobile phones. Banks can now sell their products and services via apps, "from acquisition to servicing digitally".

Moreover, no longer do banks hire college students to stand in malls to hand out credit card application forms - in the last 12-15 months Citi "has gone from zero to 30 per cent" in its card acquisition drive via the use of mobile phone apps, said Mr Gupte.

Another digital transformation is using voice biometrics for customer authentication for its call centres. These centres get millions of calls, and each has to be authenticated by questions such as your pet's name or your mother's name. With voice biometrics, rolled out 12 months ago, Citi is able to "shave around 20 per cent of the phone call time".

Voice biometrics is so unique it can tell twins apart, and can also recognise persons who enrolled in English but subsequently speak in Mandarin, he said. However, it doesn't do well when there is background noise.

Already some 340,000 out of its one million clients in Singapore who buy multiple banking products have signed up for voice biometrics authentication, he said. "Our digital strategy is not in the margins - it allows us to drive revenues," he said.

Citi has roughly 3.7 million customers in Asean and over 40 per cent of Citi's 60,000 staff in Asia is employed in Asean. A number of Citi's processing hubs and data centres, serving various businesses in over 30 countries around the world, are in Singapore.

Citi Singapore employs some 9,000 people; its Singapore foreign-exchange floor is the biggest after New York. Citi also has 18 branches in Singapore. Citi is the world's largest transaction banking provider, handling US$3 trillion in payments daily.