Mark T Robinson took over as the chief executive officer (CEO) of Citi South Asia earlier this year, when delinquencies in the retail portfolio were high. In an interview, the former head of Citi’s operations in Russia tells Sudeep Jain and Sidhartha that consumer loan losses have peaked and the descent has started. He also talks about his strategy for the financial services company with focus on traditional banking. Excerpts:
Have you settled down in your new job?
Very much so. Doing business in India is relatively straightforward and we have many customers who have been with us for decades. During my first month on the job, I’ve given priority to meeting our customers and learning about their needs. Also, when you have worked for Citi in different locations, you know the company’s strengths and how it works.
What are your top priorities and strategy going forward?
The strategy has been in place for some time now. It is to grow the business organically. It has served us well in driving strong top line growth. One of our priorities is to continue to strengthen our consumer banking platform. In some areas of the consumer banking space, we are working through credit issues.
The credit cycle we are seeing is one that most banks are going through and has arisen due to two main factors. One, the credit cycle has impacted people as the economic growth rate slowed. Two, there was over-leveraging by many customers without the necessary rigorous credit bureau infrastructure. So, we are experiencing losses on unsecured loans and credit cards, although mortgages are doing fine. In the consumer finance space, losses peaked several quarters ago and are (now) coming down. In credit cards, we are seeing the peak now and expect that credit performance will soon begin to turn around.
The second priority is maintaining our pre-eminence as a leading institutional bank in India right across the board. There is also the growth of our commercial bank, which sits between our institutional business and consumer business. Servicing more than 40,000 customers, our commercial bank is a very exciting part of our business. We have streamlined the infrastructure so that any commercial customer can now walk into our branch and have access to all our products, both for consumer and wholesale banking. Our commercial bank business will contribute increasingly to Citi’s overall business in India in the next few years.
A third priority is to take advantage of what Citi has done globally, which is to embed our universal bank structure. In the past, our industry has had a tendency to be overly product-focused. This is changing and we are now looking to provide more services and establish a broader relationship with each customer.
So, you are going back to traditional banking?
A flight to simplicity is an industry trend. In many respects, the universal bank is an easy-to-understand model and there is an attempt to strip out a lot of complexities.
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What are the changes that you are implementing to go back to traditional banking?
We have repositioned our NBFC (non-banking finance company) CitiFinancial. We peaked at about 450 locations and, last year, we restructured our network to have 118 locations. We have revised our risk and credit management systems and adopted a more centralised process.
That balance sheet now has about $1.8-billion (around Rs 8,600 crore) assets as against $2.7 billion (around Rs 13,000 crore) at the end of March 2008. We are also taking a more holistic approach towards our relationship with CitiFinancial customers. Where we once offered our customers only loans, we can now offer them a suite of products, including insurance and investment.
Has CitiFinancial restarted lending?
We never stopped lending. Our lending may have declined, but that is only to be expected given the environment. We have spent a lot of time working through our asset base, which has fallen due to the sale of assets, customers repaying their loans and us writing off parts of our portfolio. New loans are not offsetting the pace of run-offs and write-offs, which is why that portfolio has decreased.
What about other NBFCs such as the ones with Maruti and Reliance’s retail arm?
On auto loans, both partners have mutually agreed to wind down the balance sheet. Unless there is a revival in the sector that allows reasonable returns on capital in the future, we are slowly managing the business down.
Are you also repositioning Citi from one that had turned into a somewhat mass-market bank into one focused on high-end clients?
No, that is not true, but a practical reality is that we only have 40 branches. We have an important role to play in the affluent and expanding middle class segments. We have extremely good relationship with companies that are growing fast and employing people with regular salaries. We are a leader in technology and we use innovative means to expand our distribution network.