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Citigroup, the fourth-biggest US lender, expects its business in the UAE and the broader Middle East and North Africa to grow at a sharper trajectory than in the past five years, boosted by accelerating economic momentum and higher oil prices, its chief executive said.
Citigroup’s business in the UAE will continue to drive the lender’s regional growth ambitions over the next five years, Jane Fraser, told The National on Tuesday.
“I’m really excited about what I see here,” she said. “The commodity dynamic positions the region extremely well [for growth].”
The long-term economic goals of governments in the region are equally “impressive” and are opening up new business opportunities, she said.
Ms Fraser, who took over as chief executive of Citigroup last March, has been meeting clients and government officials in Qatar, Abu Dhabi and Dubai for the past three days. On Tuesday, she also met Sheikh Maktoum bin Mohammed, Deputy Prime Minister, Minister of Finance and Deputy Ruler of Dubai, the Dubai Media office said in a statement.
“For me, it’s been about spending a lot of time listening and learning from our clients” Ms Fraser said. “What are their aspirations, where they are looking for opportunities and how we can help them?”
In 2021, the Mena region accounted for more than two fifths of Citigroup's European, Middle East and African emerging markets operations. Revenue in Mena has registered high single-digit annual growth over the past four to five years.
The bank’s business recorded a “steady” growth in the UAE in the past five years, as the Arab world’s second-biggest economy continued to follow and deliver on its economic growth agenda.
“Typically you will look at two times multiplier of gross domestic product [and] we will be looking at that and then some because of where we expect to see growth and where we will be investing,” Ms Fraser said of the growth potential of the bank’s business in the UAE.
“It’s a combination of investments, new client acquisition” and the bank’s participation in efforts for continued economic growth, she added.
Supporting investments of UAE companies around the world will also boost the bank’s growth.
“A lot of conversations we are having are about their investments in Africa and Asia,” she said.
The bank expects sharp growth in its corporate, commercial banking and wealth business, with the UAE remaining one of the top global wealth management centres for Citigroup.
“I think they will all grow very fast together,” Ms Fraser said. She added that the investment banking pie is growing and she expects Citigroup to increase its share.
“I certainty intend to. I’ve told investment bankers they need to,” she said.
Within the broader region, Citigroup plans to expand its operations in Saudi Arabia and receiving a full banking licence in the biggest Arab economy is part of the plan, she said, declining to give further details.
The bank is also focused on exploring growth opportunities in Egypt, where it is in discussions with public and private sector clients.
“There are some interesting opportunities” of attracting capital to Egypt as it prepares to host Cop27, she said. “We want to do our best to support them.”
It is also closely watching Turkey, which is currently facing challenges but remains an important market with “long-term potential” for the bank, she added.
Citigroup, which is exiting retail banking operations in 13 global markets, will retain its consumer business in the UAE and will continue to support clients across the wealth spectrum, Ms Fraser said.
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The bank is divesting most of its retail operations to release about $7 billion in allocated tangible common equity, which it plans to reinvest in more profitable parts of the business.
It has already sold its operations in Indonesia, Malaysia, Thailand, Vietnam, Philippines and Australia. Its operations in South Korea were wound down.
This year, it agreed to sell its retail banking operation in Mexico, which will release another $4bn in equity, she said.
“If we look back at the strategy, it’s not what we are not going to be, it’s more about what we are going to be,” Ms Fraser said.
“We move $4 trillion of … payments [volume] a day. It’s double the nearest competitor of ours. We are big, but I’m investing in a technology platform to give us 100 times that scale.”
The bank's ongoing restructuring is comprehensive and “well ahead of where we thought we would be”, she added.
Citigroup, which has operations in both Ukraine and Russia, is “actively working” on selling its Russian consumer and other businesses in the country.
Some lenders in the global financial system have exposure to the Russian market, but it is not going to have a large impact, considering the banking industry has weathered Covid-19 and various other crises.
“For now it’s a different order of magnitude. I think anyone at this juncture is foolhardy to guess where things go next,” she said.
Citigroup’s own exposure to Russia is about 0.3 per cent of the bank’s total risk-weighted assets, she added.
The relatively smaller impact of Russia’s war in Ukraine on the US, compared with its implications for Europe from an energy perspective, means the Federal Reserve can be more aggressive in reining in inflation, Ms Fraser said.
“The US has more self-sufficiency on the energy front,” she said. “We don’t think that European Central Bank is in a position to be quite as aggressive as the Fed.”
Citigroup expects the Fed to increase interest rates by 200 basis points this year.
“We had 25 [bps] already, we expect another 50 [bps] in May,” she said. “You got to get your arms around this inflation.”
Fed chairman Jerome Powell on Monday said the central bank is prepared, if needed, to raise interest rates in bigger instalments than the quarter-point increase announced last week to contain inflation that is “much too high”.
Inflation, now at a 40-year high, was already a concern and the Russian military offensive in Ukraine added to new price pressures and supply chain impediments that could spill over into the US economy, Mr Powell said.
The war in Ukraine has also muddied the global economic outlook amid surging oil prices, which are further stoking inflation.
Brent, the benchmark for more than two thirds of the world’s oil, climbed to a notch under $140 per barrel earlier this month. It gave up some gains, but is still trading above $110 per barrel mark as Europe considers banning Russian energy exports.
On Monday, Fitch Ratings slashed its global economic forecast by 0.7 percentage points to 3.5 per cent in 2022. The International Monetary Fund is expected to lower its global growth projections as the Ukraine crisis will likely force global trade to contract this year.
Citigroup has cut its 2022 global growth forecast by 0.6 percentage points to 3.3 per cent and its 2023 forecast by 0.1 percentage point to 3.1 per cent.
The lender has increased its global inflation projection this year by 1.3 percentage points to 6.1 per cent and its 2023 estimate by 0.4 percentage points to 3.4 per cent.