Despite its withdrawal from Japanese retail banking more than a year ago, Citigroup sees good prospects for companies seeking business opportunities abroad and investors interested in global markets, the head of its Japan operations said.
“All of the trends that you see in corporate Japan and institutional Japan really tend to benefit firms like ours that can help the Japanese clients,” Citigroup Japan Holdings CEO Anthony Della Pietra said in a recent interview. “Our global network is really the key competitive advantage.”
For instance, increasing numbers of Japanese companies have been set to go overseas and Citi can provide support from a planning stage with advice on potential acquisition targets, said Della Pietra.
Since Citi has branches in over 100 countries, it is familiar with business matters in each country and can suggest which companies would best suit Japanese clients as partners.
Once Japanese companies start overseas operations, the branches can act as their local main banks to offer day-to-day needs, such as cash management.
He added that Citi has a service called Japan Desk in 10 countries including the United States, the United Kingdom, Russia, India and Thailand where Japanese bankers help Japanese firms run overseas businesses.
“I think it’s always the case that you find it easier to communicate and deal with someone in your own native language,” he said.
Della Pietra said there was greater client demand to open more. “We are now looking at opening two or three more in the coming year,” he said, though details cannot be disclosed.
Citigroup started to focus on its strengths, such as corporate banking and brokerage operations for institutional investors after announcing its withdrawal from Japanese retail banking because of low returns in December 2014.
Citigroup Japan sold its retail banking business to Sumitomo Mitsui Banking Corp. and the business merged with SMBC Trust Bank, which is wholly owned by Sumitomo Mitsui Banking, in 2015.
Della Pietra said Citigroup was not competitive enough to take on its Japanese rivals in retail banking here.
“We did not have sufficient scale in terms of the size of the business to make the returns attractive enough for us,” he said.
Citi’s Japanese retail banking operation had about 720,000 customers, about ¥2.4 trillion in deposits and 1,540 workers in 2015.
Another area Citi has been focused on is institutional investors in Japan.
Della Pietra said that both Japanese companies and institutional investors are becoming more outward-looking in their search for higher-yield products amid the low interest rate environment in Japan.
Using its global network, Citi has a wide variety of foreign securities to invest in, such as corporate bonds issued by overseas firms, he said.
The trend toward overseas securities has also been pushed by the Bank of Japan’s recent adoption of negative interest rates, which has contributed to lowering interest rates in Japan.
Della Pietra said the BOJ’s new policy has had a “neutral to positive” impact on Citi’s business, since more investors are looking outside the Japanese market.
Also, while the negative rate has hurt the profitability of Japanese banks, this is less likely to have an adverse effect on Citi because it does not have many yen-based assets.
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