CITIBANK THAILAND: Rapid growth on both the corporate and consumer fronts positioned this US giant for further expansion, and it can afford to be selective

‘I see that at the end of the day financial services will converge into what is called universal banking, which will offer a whole range of products and services’
HENRY HO
Chief executive officer

Committed to expanding in the region and becoming one of the "universal banks" in Asia, Citibank was on its way to taking over First Bangkok City Bank en the Bank of Thailand intervened and took control of FBCB and three commercial banks.

This abrupt end to the local expansion ambitions of one of the world's largest commercial banks did not deter Citibank. Its parent, Citicorp, still plans further expansion in the country but it will now depend on the opportunities available. Citibank has had a presence in Thailand since, he early 1960s through joint ventures with Nakornthon Bank, but it was only in 1985, when Citibank bought Mercantile Bank from Hongkong and Shanghai Banking Corp, that it opened a full branch in Thailand.

It is a relatively young player in Thailand compared with other markets in Asia where its involvement dates back to 1902.

"We have been in Asia for a long time and thus know Asia very well. We are beginning to grow here in Thailand," said Henry Ho, chief executive officer of Citibank (Thailand).

"We always wanted to be a part of Thailand, and with the opportunity arising for our presence we didn't back out."

Thailand has been a very large and attractive market for Citibank, which moved quickly into consumer and corporate banking.

"We usually go into a country with our corporate banking business, and only after establishing ourself do we launch our consumer banking business," Mr. Ho said. "That's the typical Citibank way of entering a market, but in the case of Thailand we launched both services almost from day one."

Citibank's goal at the outset was to be the largest corporate foreign banking institution in the country, the most important foreign bank, and the most popular foreign bank.

Looking back, Mr Ho says that to a lar e extent the group has achieved the goals it set.

On the consumer side, it wanted to establish leadership in consumer finance and credit cards. Today, we can claim that our firm was the first to bring credit cards into Thailand. We got credit cards to become a major means of payment in Thailand, and are the biggest issuer of Visa and Mastercard in the country with more than 500,000 customers.

"We have grown together with the country. We grew at more than 20% a year in the boom years and we have been very happy with our performance on both the corporate and consumer sides, but due to the current crisis we have to readjust our expectations.

"We are expecting revenue growth of around 5% to 6% overall, but on the consumer side we will shrink while on the corporate side we will grow."

The bank is now focusing on consolidation and new strategies, believing it has an advantage in terms of building market share now that many banks are on the defensive.

Thailand was one of Citibank's top three revenue contributors in Asia, and should remain at that level in the future, Mr. Ho said.

Citibank has 3.5 billion baht in assets and 45 billion baht in deposits. Using the US standard for non-perforining loans, the level is higher than in normal situations but lower than the bank had forecast.

Mr. Ho would say only that the NPLs ranged between 10% to 20%, the av-erage for foreign banks in Thailand.

In terms of strategy, he said, the bank has established divisions to manage good and bad assets. It continues to expand products, and is cautiously identifying export segments and survivors it can support further.

Mr. Ho said the focus on treasury operations would remain as Citibank was the largest player in the market. The treasury department makes hefty profits that offset declines in other departments.

The flight of capital from small Thai banks to large and foreign banks during the peak of the crisis benefited Citibank, which used the money to lend in the repurchase market.

As for the future of the sector, Mr. Ho said customers would be looking for universal banks. He foresaw very little future for finance companies beyond a few highly-specialised niche operators.

"I see that at the end of the day,. financial services will converge into what is called universal bankin, which will offer a whole range of products and service"

Citibank has been looking at the portfolios of other finance Companies but pricing remains a concern.

He said acquiring a portfolio was easier in terms of management than acquiring a bank, which would, likely require a major restructuring. There would be consolidation of branches, as the country had too many bank branches, he added.

Meanwhile, Citicapital, established in 1986 as the investment arm of Citicorp, was still investing in "high performance" local companies, he said. "These are non-listed companies in various industries such as food processing and distribution, and we see opportunities in these fields."

Citicorp also established Citicorp Leasing (Thailand) to handle consumer auto finance and equipment financing. This group is also doing well as it has been very selective about customers.

Globally, the merger of the Travellers Group and Citicorp to form Citigroup would eventually give customers in Thailand a wider a scope of products, he believes. Being able to underwrite equities, for example, will ultimately be a plus for the bank.

In terms of returning some of the profit it makes in Thailand, Citicorp has started social programmes to help the poor and those in disaster-hit areas.

Recently, it moved to help selected students at Chulalongkorn University with their fees. It also set up a relief fund for flood-hit areas of southern Thailand, and contributes funds to education of children and women in rural areas.

Among its most prominent contributions has been to the "smile programme", in which chil-dren with facial deformities receive free reconstructive surgery from experts brought in from outside Thailand.

Citibank NA, Bangkok Branch
Established: 1985
Major shareholder: Citicorp
Registered capital: 5.71 billion baht
Main businesses: Deposits, loans, bills of exchange, credit cards, treasury, capital markets, transaction services including cash management, securities services, trade services and corporate finance
Subsidiaries: Citicorp Finance and Securities (Thailand) Ltd, Citicorp Leasing (Thailand), Diners Club, Citicapital Ltd
Number of employees: Over 1,400
Assets at end-1997: 118.72 billion baht
1997 gross revenue: 15.7 billion baht
1997 net profit: 526 million baht

Worldwide
Headquarters: New York
Number of countries: 100
Number of employees: Over 80,000
1997 gross revenue: US$23.32 billion
1997 net profit: $3.59 billion