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| Citigroup to expand reach abroad as US faces Slower growth |
| Bloomberg / Jun 17, 2009, 00:49 IST |
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Citigroup Chief Executive Officer Vikram Pandit said his bank will look abroad for growth as the US economy goes through an “adjustment period”, marked by greater savings and less credit.
“There is a clear trade-off between stimulating the economy on a short-term basis and saving more,” Pandit, 52, said in the keynote address yesterday at the Detroit Economic Club’s National Summit. “Businesses are going to have to search for new growth drivers away from the US consumption and credit creation.”
Citigroup is focusing on overseas markets after the bank’s overdependence on US consumers stoked its financial woes, Pandit said. The company racked up more than $100 billion of credit losses and writedowns during a credit contraction that began in 2007. The US government has pumped $45 billion into the bank and will become the largest shareholder when as much as $25 billion of the Treasury’s preferred shares are converted into common stock.
“Citi had a business model that was predicated on ever-rising US consumer spending and credit creation,” Pandit said in prepared remarks. “We too were very credit-dependent and relied too greatly on non-core, or wholesale funding sources, including securitisation and other aspects of the shadow banking system.”
The deleveraging of the US financial system means reduced credit creation, and less available financing and working capital, Pandit said. This will also lead to lower gross domestic product growth.
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