Citigroup Inc may invest as much as US$2 billion in its Asian consumer banking unit in the next three years as the US lender overhauls branches and boosts service offerings to the region’s growing middle class.
Citigroup plans to invest US$3 billion to US$4 billion in its consumer operations, mainly in emerging markets, over the next two to three years, Citigroup’s head of consumer banking for the Americas Manuel Medina-Mora said on March 24. About half of that amount will probably go to Asia, a person with knowledge of the matter said, declining to be identified, as the breakdown isn’t public.
Citigroup, HSBC Holdings PLC and Standard Chartered PLC are among global banks expanding in Asia, where economic growth and wealth creation are outpacing the US and Europe. The Asian consumer banking unit boosted income 52 percent to US$2.17 billion last year, making it Citigroup’s second-biggest earner.
“The opportunity is very significant,” Jonathan Larsen, Citigroup’s head of consumer banking for the Asia-Pacific region, said in an interview on Friday. “I think the broad trend will continue, ie, the growth of the middle class, the increase in concentration of affluent, the increase in growth of consumption.”
Larsen said Asia would get a “significant” portion of the planned consumer-banking investment worldwide. He declined to provide a specific amount. Asia accounted for 46 percent of Citigroup’s consumer-banking income last year.
The New York-based bank yesterday announced measures to target what it calls Asia’s “emerging affluent” people — those with net worth of US$10,000 to US$100,000. Its Citibank consumer unit caters to people with up to US$150,000 of net worth. Clients with US$150,000 to US$1 million of net assets have access to the bank’s Citigold program.
The are about 500 million -people with net worth of US$10,000 to US$100,000 and financial-services revenue from that group is forecast to grow as much as 15 percent a year in most countries, Citigroup said in a press release, citing estimates by Credit Suisse Group AG and McKinsey & Co.
As part of the plan, Citigroup has expanded opening hours at branches in markets, including Hong Kong, and will introduce round-the-clock telephone banking service and convert more outlets to what it calls “smart branches,” featuring teleconferencing equipment and staff using Apple Inc iPads to display Citigroup’s online services.
“What we are trying to do is to re-engineer the customer experience,” Larsen said. “We’ve tried to make it a much more interactive experience.”
So-called smart branches cost about US$1 million each to set up, a person with knowledge of the matter said. Citigroup plans to eventually convert all its 720 outlets in the Asia-Pacific region to smart branches, the person said. It currently operates about 40 of the outlets, suggesting the overhaul could cost about US$700 million.
Citigroup’s profit from Asia rose to US$4.6 billion last year, accounting for the largest share of overall earnings, according to Bloomberg data. HSBC and Standard Chartered, both based in London, also got the biggest part of their profits from Asia last year.
Citigroup chief executive Vikram Pandit is targeting developing countries like China, which overtook Japan last year as the world’s second-largest economy after growing almost fourfold over the past decade.
Consumers in developing Asia may spend US$32 trillion in 2030, compared with US$4.3 trillion at the end of 2008, according to the Asian Development Bank. Lenders are tapping into that growth by offering credit cards, loans and wealth management services to the region’s swelling middle class.
Citigroup aims to triple the size of its branch network in China to about 100 outlets within three years, Stephen Bird, co-CEO for the Asia-Pacific region, said on Dec. 7 last year. The company on Thursday said it opened an outlet in the airport of Chongqing. It was Citigroup’s first full-service outlet at an airport, according to a press release.
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