Of risks and opportunities

Mike Corbat

While the attention of the rest of the country was rightly focused on the dedicated Filipino athletes going for gold last week during the 30th Southeast Asian Games, Citi Philippines was preoccupied by the visit of Citigroup CEO Mike Corbat.

Corbat visited the Philippines for the second time last week, the first in 2016. His coming over from across the ocean is deemed a testament to Citi Philippines’ importance within the global bank and its confidence in the country’s strong economic growth.

Citi remains the largest foreign bank in the Philippines with an employee base of some 8,000 with plans to continue growing in 2020 and beyond.

Since he became CEO in 2012, Corbat has navigated Citi into a stronger and safer company and led the bank’s first Investor Day in several years in 2017. This spelled out clear targets for further growth.

As Citi has increased returns and returned capital, the market has responded with the stock up over 50 percent in 2019 on the back of strong performance during the year. Citi looks to be on track to hit its targets.

Corbat firmly believes, however, that a company like Citi is measured not by its bottom line alone. For him, companies have a duty to the communities in which they operate.

His schedule was packed last week but he took time for an email interview with the Inquirer.

Here, Corbat touches on opportunities on the horizon, prospects for local and global growth, possible risks, financial inclusion and how Citi continues to innovate in the wake of new developments such as the growth of the fintech industry.

1. As the CEO of the world’s most global bank, where do you see the global economy going and how can we avoid the next recession?

I continue to view the biggest risk in the global economy as one of taking ourselves into the next recession as opposed to the underlying fundamentals taking us there.

Citi’s economists’ growth expectations have slowed somewhat—but we still anticipate roughly 3 percent global growth over the next few years, with faster growth in emerging markets.

But the overhang of trade tensions between the world’s two biggest economies is driving deep disconnects between the markets and what we’re seeing on the ground. Policy uncertainty continues to negatively impact companies’ ability to plan, invest and make decisions for multiyear business cycles.

Like us, our clients are seeing pretty strong economic fundamentals, as reflected in the recent “Mega Monday” (Nov. 25th), when more than $70 billion in M&A (mergers & acquisitions) deals were announced on a single day in the United States. This isn’t just about the US economy. A number of those big deals were acquisitions by European companies of target firms in the United States.

The following day, Alibaba beat Uber’s $8-billion [initial public offering] in May by raising over $11 billion on the Hong Kong stock exchange. That wasn’t just a sign of confidence in the global economy, but a show of confidence in the financial strength of Hong Kong.

In times of uncertainty, Citi’s unparalleled global network—with a physical presence in 98 markets and an ability to do business in 160—is increasingly valued by clients who seek the benefits of our global perspective.

We also continue to see strength and resiliency not just from the US consumer but also consumers globally, driven by strong indicators around jobs and employment as well as housing and asset prices.

2. What about Asia and the Philippines? What opportunities do you see in this part of the world?

Asia-Pacific is the world’s fastest-growing wealth management market. Digital adoption rates for banks in Asia are higher than in any other region and are accelerating.

On the corporate side, the region is home to a rising number of companies with global ambitions. In 2019, the Forbes 2000 was close to 30-percent Asian, representing a doubling in just 10 years. The Fortune 500 has 119 Chinese companies. Global MNCs (multinational companies) continue to invest in Asia due to its attractive growth rates. As trade routes evolve and realign in response to changing trade policy, Citi is well-positioned to capitalize on growth opportunities in the fast-growing intra-Asia and Asian trade corridors.

All these trends play to Citi’s strengths as we help our clients connect into, out of and across Asia. We are growing from a position of real competitive advantage as we already have regional scale. Six out of our 10 largest markets are in Asia-Pacific.

Asia is also at the center of Citi’s growth strategy and is the largest contributor to revenue and net income outside of North America, contributing about a quarter of total revenues.

Digital transformation is also driving strong results in our Asia-Pacific consumer franchise. Today, we acquire about half of our new-to-bank clients and more than 60 percent of our cards customers digitally, while lending through mobile platforms has doubled in three years.

We have also established partnerships with regional brands that are accretive to our global brand and fit with our clients’ lifestyles, preferences and where they are spending time. In the Philippines, mobile use is up 40 percent over last year. The growth in mobile and continued strength in digital engagement underscores the progress we’re making at meeting our clients through the channels where they choose to interact with us.

3. The banking industry is evolving fast with new fintech players entering the industry. How is Citi innovating?

The financial services industry is in the midst of a transformation, and it’s an exciting time to be in banking.

The ways in which we are engaging with fintechs are also evolving. The notion of fintechs as a threat to banks has come and gone. Today, we see partnering with fintechs as one of our biggest growth opportunities and a key driver of cultural change.

Citi Ventures, based in Silicon Valley, is charged with conceiving, launching and scaling new initiatives with the potential to transform the future of financial services. The Citi Ventures team invests in startups, pilots new technologies and tests new solutions and business models.

Our global network of Innovation Labs—located in the United States, the United Kingdom, Ireland, Israel and Singapore—are pioneering and testing disruptive new solutions for our consumer customers and institutional clients.

On the institutional side, our industry-leading digital banking platform, Citi Direct BE, deployed by our TTS business, moved over $1.8 trillion of payments last year on mobile platforms alone.

We’re constantly looking for new ways to digitize everything we do from client onboarding to self-service execution and analytics.

We’re also experimenting with big data analytics to gain a more granular understanding of what our customers and clients want and need from us.

4. Banks have an important role to play in terms of corporate responsibility, including sustainable finance. What are you doing in this space?

The focus on environmental, social and governance issues has grown rapidly in the last five years—not only in the investor and business communities but across all stakeholder constituencies.

We believe that companies have a responsibility to be good corporate citizens and to pursue a business model that enables companies to add value to society.

In early 2015, building on our previous $50-billion climate initiative, we announced a new 10-year $100-billion environmental finance goal, to lend, invest and facilitate a total of $100 billion in clean energy, infrastructure and technology projects that reduce the impacts of climate change and create environmental solutions that benefit people and communities.

We originally targeted 2023 to complete our goal, but due to increasing environmental finance activity in the global market, we reached the $100-billion mark in mid-2019—four and a half years ahead of schedule.

Across the region, Citi is supporting the growth of the green and sustainability bond market as an asset class and has led close to 30 transactions in 2019. This includes transactions in the Philippines for local banks. The country is also a leader in the Asean region for green and sustainable finance and our regional sustainable team expects issuance to double in 2020.

5. What about financial inclusion? This is an important issue in the Philippines.

Globally, we have devoted significant efforts and resources to improving financial resiliency and inclusion in communities around the world. We partner with organizations and governments in our local markets to increase access to financial services.

In the Philippines, through the Citi Foundation, we work with the Bangko Sentral ng Pilipinas on the Citi Microentrepreneurship Awards, a nationwide search for outstanding Filipino microentrepreneurs to recognize and celebrate their contributions to their communities. In the past 17 years, we have provided grants to and supported more than 140 microentrepreneurs.

Youth Co:Lab is another important regional program—led by the Citi Foundation and UNDP (United Nations Development Programme)—that aims to empower and invest in youth to accelerate the implementation of the Sustainable Development Goals through leadership, social innovation and entrepreneurship.

Over the last two years, Youth Co:Lab has been implemented in 20 countries and territories across Asia-Pacific. In the Philippines, more than 150 innovations have been proposed by young Filipino change makers since 2017. INQ