In an effort to kick-start its recovery,
beleaguered Citi is to focus increasingly on the major emerging
markets. N Rajashekaran, the bank’s country business manager in
India, tells Douglas
Blakey Citi is well placed to punch above its
weight in a local banking sector which continues to post
double-digit growth.
Few banks have endured such a torrid 18 months or
attracted as many negative headlines as once-mighty Citi,
culminating in the imminent ignominy of the US government becoming
its largest shareholder with a 34 percent stake (once around $25
billion of preferred shares convert to common stock).
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By Citi’s admission, a domestic US recovery
will be a slow process. In contrast, the bank is increasingly
bullish about the prospects of major emerging markets such as
Brazil and Asia-Pacific kick-starting its recovery and driving
future growth.
While he gave no timetable, under-fire Citi
CEO Vikram Pandit disclosed a target for the bank’s foreign arm in
a speech in Brazil on 22 June: “We will be playing two growth
themes very clearly – one is globalisation and the second is growth
in emerging markets. When you look at all of Citicorp, we are going
to be half emerging markets.”
And Pandit’s home country of India is
prominent among the list of countries on which Citi is pinning its
hopes. Despite the deepest global recession in living memory, Citi
economists have forecast Indian GDP growth in 2009 and 2010 of 6.7
percent and 7.8 percent respectively, with the bank’s country
business manager for its global consumer group, N Rajashekaran,
particularly upbeat about Citi’s prospects.
He told RBI: “Domestic consumption is
the main driver of Indian GDP… in fact it forms around 67 percent
of the country’s GDP and that growth will help to maintain rising
demand for consumer credit. I expect India will continue to make
great strides.
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By GlobalData“The net working population, around 620
million today, continues to grow and will hit almost 1 billion by
2025. It is one unique characteristic of the Indian market, with
banking sector revenue expected to grow north of 15 percent in the
coming years. I feel pretty good about the estimates.”
Very well placed
Rajashekaran argues passionately
that Citi is well placed to benefit from the growing take-up of
financial services as the percentage of the banked population
grows.
“The combination of India and consumer banking
is a great place to be and we are well placed to capture growth.
Citi has been in India for over a century and has offered retail
banking since 1985 and our distribution network continues to
expand,” he added.
That network now comprises 40 Citi retail
branches across 28 cities nationwide (a further two outlets will
open shortly), 118 units of its consumer finance CitiFinancial
franchise, 450 ATMs, a recently launched mobile banking operation
as well as internet and call centre operations. Though Rajashekaran
acknowledges a number of his colleagues would like to accelerate
the growth of the network, he loyally defends the party line: the
bank will stick to its policy of pursuing organic growth.
“I really do not fret or lose sleep about when
the next clutch of new branches is coming,” he explained.
Of his return to India to take up his current
role last year, following a spell in South Korea, Rajashekaran
said: “I had a bifocal prioritisation, by which I mean I had two
priorities: to get our business fit and, secondly, I had to focus,
realign and maximise for future high-quality earnings… and keep an
eye on both strategies at the same time.”
The CitiFinancial branch network was slashed
by around three-quarters from 450 units to its current total of 118
while the asset book was cut by around one-third.
Rajashekaran is, however, vehement that the
speedy contraction of the CitiFinancial unit is not a prelude to
Citi pulling out of India.
“Yes, announcements about Citi allocating some
business units around the world as non-core meant some people at a
local level had some concerns. But we have been absolutely clear
about our commitment to India. With $3 billion of capital invested
here, we are the largest foreign direct investor in financial
services in India and there is a revenue pool here which is very
significant. What we are doing is managing the business for value.
We now have a tighter CitiFinancial network, repositioned as a
neighbourhood financial advisory.”
Raising the bar while
restructuring
That restructuring, including cuts
in lending as Citi raised the bar for sanctioning fresh loans,
combined with improved risk management and credit scoring means
that unsecured lending losses have peaked and will continue to
fall.
CitiFinancial branches have also expanded
their product range to include insurance and investment products,
becoming less of a monoline loan network in the process.
Within the Citi retail network, product
innovation has been ramped up under Rajashekaran’s leadership with
a number of major launches in recent months. The February roll-out
of the Citibank Platinum Select Credit Card has been one of the
bank’s most important product releases, with India joining Taiwan
as the only countries in Asia-Pacific to offer the card.
“I think it would be fair to say we
revolutionised credit cards in India and, by various measures, we
rank number one or two in the local cards market. This card fits in
beautifully with our strategy… it is very customer centric offering
a range of exclusive privileges,” he explained. “We do not look at
it as a quick hit but more a pillar of our strategy,” he
explained.
Other new products include the Preferred Rupee
Checking Account, Citi Online Remit and Citibank Protect &
Grow.
A niche offering for Non-Resident Indians
(NRIs), the Preferred Rupee Checking Account offers a dedicated
priority service platform, competitive foreign exchange rates on
inward remittances, lower service charges on a range of banking
services, and custom-designed privileges on some characteristic
India-oriented requirements of NRIs.
The February launch of a new online money
transfer service to India – Citi Online Remit – was designed to
further strengthen Citi’s NRI offering, and has, says Rajashekaran,
been well received so far. “While we cannot afford to rest on our
laurels, the services for NRIs are excellent examples of Citi’s
Global/Local offering. It is something we are good at,” he
added.
Debuting mobile services
He is equally bullish about the
bank’s March debut of Citi Mobile, offering customers the option to
check account balances, send money, issue drafts, pay bills and
make credit card payments via mobile phones.
“Customers will be able to do pretty much
anything via their mobile that they can do by way of internet
banking. Given the recent growth trends in mobile phone usage in
India, we expect this to grow into a significant channel for
customer service and contact,” he said.
But while the extended product range and
distribution investments have captured headlines, it is the need to
focus increasingly on improving the customer experience that
Rajashekaran argues can ensure Citi differentiates itself in the
market.
“We could try to compete on price, but we do
not; we could compete on products… we are very good at innovating
products but there is the danger they do not give a long
competitive advantage because they can be copied. Nor do we seek to
compete on distribution,” Rajashekaran explained. “But on
service… I want every interaction customers have with us to be
far ahead of what other banks offer.”
So Citi now benchmarks its service levels not
just against banking rivals, but seeks to measure itself against
the service levels of the best in class in the retail sector, with
the bank’s service strategy set out in a ‘Vijay Mantra’ (a ‘victory
chant’ in English), about which Rajashekaran verges on the
evangelical.
Looking ahead, he argues the combination of
innovation, distribution investment and improved service will
achieve the bank’s country goals and boost a cross-sell figure he
will not divulge.
“The cross-sell curve is sharply upward. Speak
to me again in a year or so and I will definitely report
significant gains on our cross-sell ratio.”
|
Credit trends |
||
|
Citi – top 10 non-US markets based |
||
|
NCL ratio (%) |
% of total group NCLs |
|
|
Japan |
13.5 |
19.5 |
|
Brazil |
13 |
5.7 |
|
Mexico |
9.1 |
20.7 |
|
Italy |
8.7 |
2.5 |
|
Colombia |
8.7 |
1.5 |
|
Greece |
7.6 |
3.7 |
|
Spain |
7.3 |
4.5 |
|
India |
7.1 |
8 |
|
UK |
5.3 |
8.4 |
|
Poland |
2.9 |
0.6 |
|
NCL=Net Credit Losses Source: Citi |
||
Branding
Citi India top-ranked
foreign bank brand
|
Brand power |
|
|
India – top 10 brands and selected |
|
|
1 |
Reliance Mobile |
|
2 |
Airtel |
|
3 |
State Bank of India |
|
4 |
Life Insurance Corporation of India |
|
5 |
BSNL |
|
6 |
Vodafone |
|
7 |
Tata Indicom |
|
8 |
Bank of India |
|
9 |
Big Bazaar |
|
10 |
ICICI Bank |
|
12 |
HDFC Bank |
|
20 |
Indian Bank |
|
29 |
Axis Bank |
|
44 |
Citi |
|
Source: Neilsen |
|
