Fri, Feb 24, 2006 - Page 10 News List

Citigroup foresees a banner year

EARNINGS GROWTH The firm expects to build on a record year last year, and part of its plan includes acquiring rivals to expand its credit-card business

By Amber Chung  /  STAFF REPORTER

Citigroup Taiwan, which reported record high profits last year, expects earnings to continue to rise, growing at a double-digit rate this year, the company said yesterday.

The company posted a record NT$10.32 billion (US$317.6 million) in pre-tax profits last year, up 6.57 percent from the previous year, a record high in its 41 years in Taiwan.

Citigroup's NT$10.32 billion profits accounted for more than half of the NT$20.08 billion of total earnings generated by the 36 foreign banks in Taiwan last year.

"We saw significant growth in our consumer, corporate and investment banking business units last year, and we hope to retain double-digit growth momentum this year," Citigroup Taiwan's country officer Morris Li (利明獻) said during a press conference yesterday.

The banking giant will work hard to reach the goal amid a difficult macro-environment, where the firm sees a slew of risks, including spiraling consumer bad debt, lackluster economic growth, decelerating export growth, an increasing number of Taiwanese companies moving offshore and an overly crowded banking sector, the senior banker said.

Even so, Citibank is seeking to acquire rivals in a bid to further expand the scale of its credit card business.

"The market will see a huge reshuffle this year. We are very interested in taking over competitors that are planning to quit the market and will not miss any acquisition opportunities," said Victor Kuan (管國霖), country business manager of consumer banking at Citibank in Taiwan.

Kuan however declined to elaborate on any ongoing talks and possible targets, citing business confidentiality.

Citibank is the nation's seventh largest credit card issuer, with 1.74 million cards in circulation.

According to figures from the Banking Bureau, a total of 45.49 million cards were in circulation as of the end of December.

The consumer bad debt problem has not yet peaked, in light of the relatively small number of cases resolved under the government's credit debt negotiation mechanism and uncertainty over future amendments to the Bankruptcy Law (破產法), which are designed to relieve indebted cardholders, Kuan said.

It is still too early to predict when the issue will ease, he said, adding that it usually takes about 15 months to 18 months based on the experience of other countries that have suffered consumer credit crises, such as Hong Kong and South Korea.

Despite the bumpy road ahead for the consumer banking segment, the outlook for Citibank's investment banking unit appears promising, on expectations for industry consolidation.

"We expect to see ... robust merger and acquisition [M&A] activities globally this year" said Du Ying-tsong (杜英宗), chairman of Citigroup Global Markets Taiwan Ltd.

There is also a need for consolidation this year in several industries in Taiwan, including the finance, thin-film-transistor liquid-crystal-display, electronics manufacturing services and components sectors, Du said.

Foreign private equity funds will play a key role in the nation's M&A deals this year in light of cheap funding costs given to the nation's low interest rates, Du said.

Citigroup Global Markets Inc advised on BenQ Corp's (明基) acquisition of Siemens AG's handset unit last year and private equity Newbridge Capital Inc's NT$27 billion and Nomura Securities' NT$4 billion investment in Taishin Financial Holding Co (台新金控) earlier this month.

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