Taipei Times: How is Citibank faring amid the ongoing European debt crisis when compared with the global financial crisis of 2008?
Stephen Bird: We are in a much better position than in 2008 because the US mortgage crisis was a much bigger problem for Citibank. US housing was a much larger problem than Europe for the company. Our exposure is a net US$6 billion for Europe [as of March 31], which is very manageable, compared with US$1.9 trillion on the balance sheet.
However, Europe’s debt woes are a very large problem for the world. We don’t underestimate its impact or importance. They are a drag on global growth and Asia is not immune to the slowdown.
Asia, which represents the world’s best growth opportunity, has a number of huge fundamentals in its favor, though. Two-thirds of the world’s population lives here, and the region’s urbanization and digitization are in a mature stage, allowing connectivity between Asian countries.
Regional trade has doubled in the last five years and we expect Asia to grow by two to three times faster than the developed world economically. Therefore, we feel great about our position in the region and will enjoy fast growth because of the fundamental rebalancing of the world’s economy.
The sovereign debt issue makes us more cautious about the way we evaluate investment and the way we build our business.
TT: Lately, Citibank has offloaded its stakes in foreign banks in Turkey, India and Shanghai. Will the company scale back investment in Taiwan?
Bird: Citibank has no plans or need to cut investment in Taiwan. Since we entered the market in 1964, we have continued to invest here. Last year, it was the second-most profitable lender among all its peers.
Citibank sold minority positions in those foreign banks to prepare for Basel III compliance. Minority positions carry high capital charges, so it was a natural thing to sell those positions. When you have good capital strength, you can keep investing in your core business.
Taiwan's success is what Citi wants to be ... We acquired the local Bank of Overseas Chinese (華僑銀行) in 2007 and scaled up to a much larger position in the local market. Clients very quickly felt the benefit of being part of Citibank. Last year, Taiwan contributed about 15 percent of all net income in Asia. That is what Citi wants to do.
TT: Would you share the group’s development plans in the region, especially in China, as the country is playing an increasingly important role in the world?
Bird: We have made significant progress. First, we applied for and obtained a credit card license. In fact, Citibank is the only international bank that has a credit card license nationwide in China. We have been testing the systems for the last two months and are going to launch the business after the summer.
The development is strategically important because we believe China is becoming more of a consumer as the country aims to focus more on domestic demand and grows less dependent on exports. We believe in the overwhelming demographics of 1.3 billion people. We have built branches in major cities near or inside huge retail malls where people work, shop, play and enjoy themselves.
Second, we have formed a joint venture securities company, an investment bank called Citi Orient. That is a fully approved deal and we are about to launch the business. That allows us to participate in the capital market in China, which we believe will become the largest capital market in the world eventually.
TT: Created 200 years ago, how will Citibank position itself in the next century?
Bird: Today our TIER 1 capital is 12.4 percent, making us one of the strongest banks in the world. In Asia, we provide financial services in 17 countries and our businesses are almost 50 percent institutional and 50 percent retail. Of the 17 countries, not one market comprises more than 15 percent of our net income. That gives you diversification and stability as well.
In the future, you will see Citibank invest in core banking technology as we have done in Taiwan — building smart banking because we believe that is the way customers want to engage with us.
TT: Would you supply more details about how Taiwan fits in the picture?
Bird: The last 100 years was a great American century when all the Fortune 500 companies came out into the world. We benefited by bringing those companies out into the world and today they are still our huge clients.
Now for the great Asian century, we are working with Acer Inc (宏碁), Hon Hai Precision Industry Co (鴻海精密), HTC Corp (宏達電) and Quanta Computer Inc (廣達) — Taiwanese companies that are helping the world digitize. Our job is to help them sell their technology through our global capital management capability, global pooling capability and foreign currency hedging capability.