We're doubling down investment in institutional biz: Citi Asia-Pacific CEO

In this exclusive interview with Tamal Bandyopadhyay, Citi Asia Pacific CEO Peter Babej explains why his bank has chosen to sell its retail business in India and what it plans for the future

Now it’s official. Citibank, which once wanted to go to the suburbs in India, is selling its retail business in the country to Axis Bank, India’s third-largest private bank. The sale is part of Citigroup CEO Jane Fraser’s plan to overhaul the bank’s business model and existing consumer business in 14 countries, including Mexico, which was added later to the list. A day after announcing the Rs 12,325-crore all-cash deal – Axis Bank will pay Citi an additional amount for transitional support until the operations are fully integrated – Citi Asia Pacific CEO Peter Babej explained Tamal Bandyopadhyay why his bank had chosen this path. Edited excerpts from the exclusive interview:

Why did you choose to sell your consumer businesses to Axis Bank?

When Jane (Fraser) took over as our global CEO a little over a year ago, we decided that we would prioritise and be honest about our strengths. Jane called it a strategy refresh, under which we took a strategic, almost clinical, view of our businesses. This meant taking tough decisions for businesses where we might be doing well currently but would not grow enough to remain competitive in the longer term.

We said we would try our best to ensure the decision to exit those businesses was not just financially motivated but also taken with the view that our people would get a great new home. We are a bank with a head and a heart; we would never make a decision without thinking about the well-being of our people. So, we decided to pursue exits from consumer businesses in 13 markets across Asia and EMEA (Europe, Middle East and Africa), including India, and enable more targeted investment in businesses where we had competitive advantage and the necessary scale.

We are very proud to have entered into this transaction with Axis Bank. Why shouldn’t we be? It’s a leading private-sector bank which operates a full suite of businesses across all client segments. We ran a very rigorous process where several bidders gave their expressions of interest. We truly believe this will provide excellent opportunities for both our employees and customers of our consumer business in India.

You made the announcement on Wednesday. When will the deal be closed?

The closure of the transaction is subject to necessary regulatory approvals, including one from the Competition Commission of India. We expect to close the transaction in the first half of next year. The announcement has kickstarted the process. While there will be a transition, we will ensure it is done in a seamless manner. The transition will create minimal disruption for our customers and employees.

The assets are to be transferred to the buyer. What will happen to the 3,500 employees of your consumer banking division?

Like I said before, we like to think that we are a bank with a head and a heart. The well-being of our people is our topmost priority. In every market where we are exiting consumer businesses, one of our foremost considerations is to find a buyer that shares our values and takes care of our employees and customers. We have been successful in ensuring this in every sale transaction that we have executed so far with the likes of UOB, Union Bank of the Philippines, National Australia Bank, DBS, and now Axis Bank.

The transaction In India includes around 3,600 in-scope Citi employees supporting the consumer business. All of them will be transferred to the payroll of Axis Bank on completion of the transaction. To all these employees, Axis Bank is extending offers that are no less favourable on an aggregate basis than those it has with Citi.

Citi is 120 years old in India, one of its top five markets by revenue and profits. Still, you are shutting down your consumer banking division – credit card, mortgage, personal loan, deposits and wealth management businesses. And that at a time when the Indian subsidiary of DBS of Singapore has acquired Lakshmi Vilas Bank. Could you not have revived it, when India is emerging as “the” market for most foreign banks?

India is a large consumer market, but it's a unique market with established domestic players in the retail space. Globally, the trend is that domestic players are dominating the consumer banking scene. We want to play to our strengths. Our strength is our globality and our market-leading presence in the institutional banking space. We want to focus on the unique proposition and competitive differentiation that Citi offers as a truly global bank to institutional clients in India.

India is one country where we believe we can deliver something special and where the macro environment is conducive. In fact, on Citi’s recent Investor Day in the US, Jane made a special mention of the India opportunity in her investor presentation.

India is one of the 13 markets from where Citi plans to exit. But you will continue with your consumer banking business in four global wealth centres – Hong Kong, Singapore, the UAE and UK – beside the US. Considering the potential, couldn’t India have been the fifth market?

Markets like Hong Kong and Singapore are hubs for offshore wealth. We are redoubling our focus on wealth. Our global clients are concentrated in these markets. What is truly special about what we can offer is our global network to diversify portfolios. Let me repeat, our globality is our biggest strength and we can leverage that to advise our clients on wealth across jurisdictions. We can serve the Indian diaspora across continents as and when their businesses and families move to different parts of the world.

Citi’s focus, it seems now, will solely be on its institutional business, where it has a sustainable competitive advantage. Is this enough to stay relevant in the world’s sixth-largest economy?

For us, India is even more critical now than it was before. We see a phenomenal opportunity in India: An economy that has made a lot of great choices and great investments over several past years. Plus, it has the scale and connectivity with the rest of the world that plays to what we deliver exceptionally well. Look at our key client segments. We have the subsidiaries of global MNCs where we have been a leading player for a very long time, and that opportunity is massive and growing.

Then, there are medium-sized players that are becoming leaders in their space and globalising every day. We are helping them in that evolution.

The third kind are businesses that are not necessarily start-ups but those that are growing rapidly from a relatively small base and need a financial partner to advise them on their growth aspirations. Our commercial banking business has done really well in catering to the needs of this segment. In fact, this is a major area of growth for us, with plans to double the balance sheet and grow the employee base by 50 per cent in the next five years.

This year alone, we will add around 5,000 people across the banking businesses and our five Global Capability Centres in India that support our global businesses. We come from a position of strength as a leading player in the institutional banking space. More than 30 per cent multinational companies in India – more than 1,000 in number – bank with Citi.

Supporting the Digital India initiative, we are a preferred banking partner for the start-up community and bank more than 40 per cent of Indian unicorns. We are actively engaged in various government initiatives, such as Atmanirbhar Bharat (Make in India), including working with our clients to channel foreign capital through foreign direct investment (FDI) under the government’s performance-linked incentive (PLI) scheme. We are already engaged with 40 multinational clients in helping them participate in the PLI scheme.

Citi also manages 8 per cent of India’s trade flows and 5 per cent of domestic electronic payments flows.

We have been a leading investment bank for over 15 years in your country. In 2021 alone, Citi was involved in transactions across mergers and acquisitions, equity and debt markets aggregating $32 billion handling 50-plus deals. We were involved in all the marquee consumer tech/fintech initial public offerings in India, including Zomato, CarTrade, Nykaa and Policybazaar.

We helped raise $12 billion in 19 deals in the US bond markets. In value terms, these are close to 50 per cent of the transactions done.

The Indian government has announced an expansionary Budget with a strong focus on investments across infrastructure and capital expenditure for FY23 and beyond. A large part of the financing would be channelled from international sources – both FDI and financial institutional investment (FII). Citi’s Institutional business is uniquely positioned to play an active role in this investment phase of the country.

In the past two years, first the Covid pandemic and now geopolitics have changed the world order a lot. Do you see this as a great opportunity for India to attract more capital? If so, how can Citi seize the opportunity?

In the past few years, the Indian government has taken a series of significant steps towards Digital India through the introduction of the JAM (Jan Dhan-Aadhaar-Mobile) trinity. This has coincided with a surge in smartphone usage, leading to a rise in e-commerce transactions in Tier-II and -III cities. The lockdowns in the wake of the pandemic have also increased digital usage. Citi has always been a pioneer in digitisation and has been able to capitalise on this trend with its strategic suite of products.

As the global supply chain gets realigned in the aftermath of the pandemic and the evolving geopolitical situation, India is in a unique position to seize the emerging opportunities. A lot of institutional investors and asset managers are focusing on India. Our 120-year franchise and expertise enable us to meaningfully support India’s growth aspirations.

We are also strategically positioned to continue to be India’s partner in growth across key development areas, such as boosting micro, small and medium enterprises (MSMEs), investing in the so-called priority sectors, helping financial institutions, bolstering digitisation, and enabling the flow of capital through government-backed schemes, like the PLI. The way I see it, we are already seizing the opportunity, and we will continue to do so.

You are a global bank, in the truest sense of the word. Will you explore new business lines and sectors in India to grow?

There is so much opportunity in the businesses we are already in, be it banking, markets or transaction services. Our priority is always the client, not the product. Many of our clients are evolving continuously on the road to becoming bigger, and we want to grow with them. We want to partner with them on their journey. The partnership itself will create significant additional opportunities for us. We have done this really well with our commercial banking clients.

We try to focus on what the client would need and take a client-centric approach. Technology is the most important factor in all of this. So, we will invest heavily in technology.

In April, Citi announced exiting consumer businesses in 13 markets across Asia and EMEA. Recently Mexico was added. Now the India deal is announced. Are there any instances where one buyer has agreed to take over your consumer businesses across multiple markets? Also, what’s happening in other countries?

We have made good progress to date in the 13 markets in Asia and EMEA had planned to exit. We have announced a buyer in Australia, the Philippines, Taiwan, India and the four ASEAN markets of Malaysia, Thailand, Vietnam and Indonesia. These four markets were all sold to UOB. The decision on the Mexico exit was taken later. In South Korea, we had to take the extremely tough call to wind down the business.

But I am pleased that across all markets where we have found a buyer, we are managing the transitions seamlessly with minimal disruption for our customers and employees.

What is your message to India – the corporations, consumers, government?

I want to say that we are incredibly committed to India. We are a 200-year-old bank that has been in India for 120 years, and we look forward to being around for another 120 years. We want to be a great partner to India. We know that if we can do that, everything else, including our financial returns, will fall into place. We believe we can offer a lot to our clients here and we look forward to growing with them. We see a tremendous opportunity in India where our focus will be on areas where we can deliver excellence – our institutional businesses.

The emerging geopolitical situation, coupled with India’s strengths – which include the demographic dividend it enjoys, the digital penetration and usage, and the political stability – make it uniquely poised to emerge as an economic superpower.

Citi remains committed to India with its strategic capabilities and offerings in the institutional banking space. We are doubling down investment in our institutional businesses where we have a unique position that helps us play a key role in the India growth story.

We are also tapping into the Indian talent pool in the areas of technology, operations, analytics, finance and allied functional areas with increased hiring across our network of Global Capability Centres that are located in five cities in India and support our global businesses. Last year alone, we added about 4,000 employees to these centres, taking their headcount to over 21,000.

Rest assured that we will continue to invest in people, digitisation and increasing our client base in India.