Citi has posted its highest-ever quarterly revenue in Asia as the US bank continues to withdraw from high-cost businesses globally.
The bank announced late Tuesday that it was exiting consumer banking in a further 11 markets, including Japan, reducing these to 24 – half of which are now in Asia. It withdrew from five other markets in 2012.
As the bank re-aligns its businesses globally to reflect areas in which it can be more competitive, Asia on the whole continues to prove its importance to the group.
Citi said its net income in Asia in the three months to September-end was 39% higher at $1.1 billion compared with a year earlier, on revenue which rose 8% to $3.9 billion. Regional earnings before interest and tax (Ebit) rose 36% year-on-year to $1.6 billion, it said.
These are the highest quarterly revenues and Ebit for the bank in its 112-year history in Asia, accounting for a third of Citi's global net income and a fifth of its global revenue.
“We are executing on our strategy of delivering a sustainable annuity of growth with Asia playing an important role in Citi’s global strategy of being the world’s leading global retail and institutional bank.” Stephen Bird, chief executive of Citi Asia, told FinanceAsia in an email.
Citi’s results reflect the balance the bank has achieved in the region, with revenue split evenly between the institutional and retail side of the business.
Global Consumer Banking posted revenue of $1.9 billion, up 4% year-on-year, with double-digit percentage growth recorded in China and India. The Institutional Clients Group saw revenue rise 14% year-on-year to $1.9 billion.
Raising capital, making deals
Citi helped Asian clients raise more than $50 billion from capital markets during the quarter, including Alibaba which came through with a $25 billion initial public offering in New York, the world’s biggest-ever IPO. The bank also led the $878 million IPO of Luye Pharma and priced more than 30 debt transactions, including a €1 billion bond from the Republic of Indonesia.
In addition, Citi advised on nearly $30 billion of mergers and acquisitions, including a $2.4 billion consortium investment in China Huarong Management, and in June surpassed $250 billion in client assets in Asia, a 10% improvement on a year earlier.
It also opened an office in Sao Paolo for Chinese multinational clients; the bank now has 10 such offices. (The importance of China to global banks was further underlined on Wednesday as UBS opened an office in Beijing; its first ground-floor presence on the mainland).
Still, Citi's retreat from consumer banking in Japan -- largely reported by the media in August but not confirmed by Citi until now -- represents a dent to its regional ambitions, much like its withdrawal from consumer finance in South Korea.
Low interest rates, fierce competition from local banks and thin profit margins have made for an unhappy time for Citi and other foreign entrants in Japan. According to media reports, the bank has already shortlisted several local groups for its 33 branch network.
But its withdrawal from Japanese consumer banking also forms part of a broader reassessment of the global bank's priorities, since Citi also announced that it would pull out from consumer banking in Costa Rica, the Czech Republic, Egypt, El Salvador, Guam, Guatemala, Hungry, Nicaragua, Panama and Peru.
“While we have made progress optimising these 11 consumer markets, we believe our Global Consumer Bank will achieve stronger performance by focusing on the countries where our scale and network provide a competitive advantage,” Michael Corbat, Citi chief executive, said in a statement.
The move comes as Citi’s third-quarter group net income beat estimates. Net income was $3.4 billion for the quarter compared with $3.2 billion in the year-ago period. Revenue rose 9.5% to $19.6 billion.
This amounts to earnings of $1.15 per share, a 13% year-on-year increase; analysts were expecting $1.12 per share.
