Citi missed analyst estimates for group fourth-quarter earnings last week and, like the rest of Wall Street, endured a difficult 2014 but Asia continues to pull its weight for the US bank.
In an internal memo to staff, seen by FinanceAsia, Citi underlined the importance of the region to its global business over 2014, with Asia-Pacific ex-Japan accounting for 19% of global earnings before interest and tax (Ebit), making it Citi's largest regional contributor outside North America.
“All the elements of the Citi model in Asia clicked in 2014. On the banking side it was a very strong year that’s reflected in increased wallet share with key clients across areas such as [mergers and acquisitions] and capital markets,” Stephen Bird, Asia-Pacific chief executive for Citi, told FinanceAsia.
“Asia is playing an important role in the transformation of Citi globally to a stronger company,” he said.
For the fourth quarter, Citi Asia-Pacific ex-Japan contributed $1.3 billion of Ebit, up 10% year-on-year. Meanwhile, revenues rose 3% year-on-year to $3.2 billion.
Institutional Clients Group (ICG) revenues rose 4%, led by a strong performance in markets, which jumped 8%. Consumer banking revenues for the quarter rose 1% year-on-year.
For the full year, Ebit in the region rose 4% to $5.6 billion on revenues of $13.7 billion, an increase of 2%. ICG revenues rose 2%, with banking revenues up 7% after a strong year for M&A, which Citi called “one of our strongest on record.”
Full-year consumer banking revenues increased 2%, underpinned by strong China and India franchises, which posted 18% and 8% revenue growth respectively.
Asian focus
Citi’s consumer business has a particular Asian focus, with 12 out of the bank’s 24 consumer markets located in the region.
The bank reinforced this message this month with the appointment of Gonzalo Luchetti as head of Asia retail banking. Luchetti will relocate from New York to Hong Kong and continue as global head of wealth management and insurance at the consumer bank.
The move reflects the increasing affluence of the Asian consumer and the heightened interest in the region among global investment banks.
For Citi there was good growth for its credit cards business, with China providing the bank with its fastest growing market globally. Meanwhile, in wealth management the bank passed $250 billion in assets under management during the year.
“Asia has a fast-growing emerging affluent consumer base which plays to our strengths as the region’s leading wealth manager,” Bird said.
This is just as well because the group had a difficult 2014, with the fourth quarter particularly troublesome.
Quarterly group net profit sank 86% year-on-year due to legal costs and a poor performance in fixed income, which also hit other banks last year.
Bird acknowledged it had not been an easy year due to slow global economic growth and low interest rates, and that 2015 would be at least as tough.
So it's a good job Asia keeps delivering the goods.
“Despite slowing global growth, Asia’s corporate champions have continued to perform strongly and are using our network across Asia,” he said.
