Shayne Elliott moved to Hong Kong in early July to head Citigroup's global transaction services (GTS) in Asia. From this lofty position he manages the product segment that hits 80% of the bank's client base - products like cash management, trade finance and securities services. Elliott is a career Citibanker, joining the firm as a trainee in New Zealand in 1985. He spent most of his early years in derivatives marketing, taking this role to London in 1992. From there he moved to New York and then became country head of Egypt for two and half years. His most recent role was country head of Australia.
Why has the term GTS re-emerged at Citigroup?
Earlier in the year we did some detailed analysis of our customer base and realised that a significant portion of our corporate and financial institution customers rely on us predominately for transactional banking services and basic treasury services. Their needs don't always extend to fixed income, investment banking or advisory. In fact, 80% of our clients fit this description. That's why we have consolidated our transactional banking products under the GTS name.
So you are providing cash, trade and securities services to clients?
Yes, but the GTS group will also sell the full range of Citigroup banking products to all the clients we are managing.. That means we will lend money, arrange a bond issue, transact derivatives, or provide other corporate services to customers that are primarily GTS relationships for the bank.
Why has the "e-business" name been dropped?
The electronic delivery of our business is still very important but to signal the change in focus for the division we through it was better to go with GTS. E-business was really a product description, but now our business is broader than that, and is relationship driven.
Why have you included securities services, or custody, in the mix again?
Because our custody clients have broader needs than just custody products. From an internal perspective, custody shares many of the characteristics of cash and trade; they are all scale-driven businesses. Our relationships with financial institutions (FI) are just as important as our corporate ones. We think there is an untapped opportunity to sell more products to the FI client segment. It makes sense to share product knowledge between the securities services and the cash management groups for the benefit of our clients.
So how do you fit into this new GTS structure?
GTS has four geographical divisions - North America, Latin America, Europe/Middle East/Africa and Asia Pacific - I head the Asia Pacific piece. Reporting into me are regional product heads who also have a line into a global product head. Anthony Nappi runs the cash business in Asia and Andrew Au will be picking up the trade role starting next week. Andrew is a Hong Kong national and is currently country head of New Zealand. The securities business will be run by Margaret Dawson who starts on September 1. She is currently chief of staff to the Citigroup country officer in Japan. In addition, I have Richard Brown as head of financial institutions for the region, and Tom DuCharme running regional sales.
Are you also hiring new people?
We are doing some hiring but mostly we have realigned our existing resources so that we have more sales and marketing people in GTS than ever before. This means in each country we have taken some of the existing relationship management resources and dedicated them specifically to GTS.
Is it your plan to build up the FI business to the same size as your corporate business?
FIs currently represent about a third of our overall business. But this market segment is growing quickly. In the emerging markets, the finance sector tends to grow considerably faster than the corporate sector. Being a global business we offer a very attractive product set to FIs and I think this business will continue to expand for us - indeed it will probably grow quicker than our corporate business for some time to come.
Citigroup banks both multinational companies and local corporates. Which of these do you have greater strengths in?
Traditionally, our greatest strengths have been with multinational companies. Within the multinationals, branded consumer companies is a segment in which we have excelled because these companies tend to be global businesses with high trade volumes and complex multi-currency needs in terms of cash transactions.
So how do you match this with your aspirations to bank local corporates?
We are certainly targeting the local corporate sector and this sector is growing fast, as you would expect. But in this area we compete with local banks which have expansive branch networks that make servicing clients much easier for them. It is unrealistic to assume we will develop equivalent branch networks in a timely and cost-effective manner to compete at the same level. So for now we compete on other things like technology and product innovation. These attributes work well in more developed markets. The good news is that as those markets develop, clients increasingly want to deal with electronically, and that means the market is moving those clients to us.
How does China figure in your GTS strategy?
We have 18 countries in the Asia Pacific region - with Japan and the Indian sub-continent recently added to the mix - and our biggest growth markets are India and China. For GTS, China is already one of our top six markets in terms of size and this ranking has been achieved in relatively few years. There is huge interest in China from our client base. Our success to date has been our knowledge of the local market and an ability to develop products that apply to local needs. For example, we were able to develop and roll out a lighter version of our electronic banking platform in China called Citibank Easy Payments. This has been enormously successful, and given us a lead in the market.
With interest rates trending further south, where is your profitability going to come from in the next 12 months?
Interest rates have always been a big source of returns for Citigroup but despite the decline in rates we have still be able to grow our top line - albeit slower than we may have liked. The reason we have been able to increase revenue despite the environment is because we have a good balance of fee-based income and rate-based income. Getting the right mix of these revenue sources is always challenging from a strategic perspective. At the end of the day, the only way to increase long-term profitability is to acquire more customers and our track record in winning new business is enviable.
What do you think is the biggest challenge facing multinational companies operating in Asia?
All companies are focused on efficiency from two perspectives - how to cut costs and how to make more money from surplus cash. We help them use their cash more efficiently through pooling and zero balancing accounts and give them a wider range of investment opportunities. We have been able to help them take costs out of their business by offering outsourcing solutions. We are a processing shop with enormous scale, and we can share that scale advantage with our clients.