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How do you compete against the large local banks in Japan?
Japan is the world’s third-largest economy and as such remains an important country on the radar for global multinationals. But we are also seeing an increased outbound drive by Japanese companies as they expand overseas.
To help Japanese multinationals expand we have opened dedicated Japan desks across the world to serve Japanese clients in areas such as cash management, hedging and trade finance. Citi’s global reach and presence across emerging markets gives our Japan franchise a significant competitive advantage and we will expand these desks further this year.
We already have Japan desks in China (Beijing, Shanghai, Guangzhou), India, Indonesia, Thailand, Singapore, the US, Brazil, the UK and the Philippines and plan to open new Japan desks in the Czech Republic (Prague) and Dubai in early in 2011.
Japan is one of Citi’s most important markets, not only in Asia-Pacific but also globally. We have a history of more than 100 years in Japan, which means over the decades we have developed strong relationships with corporate Japan. This is underlined by our work with some of the Japanese corporate blue chips in 2010, when we raised more than $20 billion for them from the global capital markets, according to Dealogic data.
Many of the local competitors, who are our clients too in many cases, do not have this global platform and in some cases they are using our services across the globe. It’s a good partnership. You are, though, seeing the re-emergence of the Japanese banks on the global stage and this competition is healthy -- it keeps you on your toes for sure.
How important is Japan to Citi’s overall franchise?
We do not disclose our Japan numbers but to give you some scale, Citi reported revenues of $14 billion in the region in 2009 and Japan contributed more than 10% of these revenues.
The core business, which includes global banking, markets, transaction services, retail banking and cards are all well positioned for further growth in this market. We also look to differentiate by using technology and innovation. We are investing in new innovation in our retail banking business and we have introduced a number of new innovations in Japan over the years. For example, we launched Smart Banking in Japan (in 2010), our new-high-tech retail banking service that is now being rolled out across Asia-Pacific.
Isn’t something like Smart Banking just marketing schtick?
No, it’s innovation – and it works. Through the introduction of Smart Banking branches we are aiming to provide a new style of retail banking in the Japanese market. Customers have the choice of using the branches’ state-of-the-art technology, such as interactive touch panels and video-conferencing, or receiving full-service banking from branch staff in the private consulting rooms. We have actually seen a doubling of account openings at these branches versus traditional branches. We just rolled out our third Smart Banking branch in Japan in the key market of Nagoya and the service has also been rolled out across Asia in established markets, such as Hong Kong, and in some of our newer retail markets, such as Vietnam.
What trends are you seeing in investment banking and capital markets in Japan? And what are your expectations for deal flow in 2011?
In 2010 we saw several large-scale fund raisings for leading names such as SMFG, Toyota, Honda and Nissan. They are all global names and we played a role helping them raise capital. We would expect this fundraising to continue as companies look to raise cost-effective capital.
We are also seeing more large companies looking to expand their businesses outside Japan, based on the conversations we are having with clients. We would expect to see more outbound M&A from Japan too due to the strong yen, which will be an impetus for more cross-border/outbound M&A. Don’t think it will just be Chinese and Indian companies making all the headlines this year – Japan is still very much alive and kicking and home to some world class brands that are looking very closely at the developed and emerging markets for further growth opportunities.
