In an interview with Sudeep Jain and Sidhartha, Fraser, whose previous role entailed supervising Citi's divestiture programme, discusses why India is one of the top two growth markets for Citi Private Bank.
Where does India fit into your scheme of things?
Among the fastest growing wealth markets, India is one of Citi Private Bank's top two growth markets. The key factors supporting our very positive view of India are its very mature capital markets and the local investment arena which is such that a high-end banking proposition could really take off.
India has tended to be a bit of an equity brokerage market, but the take-off point has come, as you can provide a real private banking proposition to help clients create wealth in a more significant way.
Top-end clients seek an institutional proposition and if you just talk to them about equity brokerage or deposits, you are missing what they actually need. This is why our private bank sits in the institutional business and I report to the global head of Citi's institutional business.
What investments have you made in India?
Our main focus of investment will be on talent. We are looking at doubling the number of people from the present 29 to 45 by the end of 2010, and we will continue scaling up over the next few years.
We have a team approach for covering our clients and it is not just one individual as a gatekeeper. That individual's job is to give clients the keys to Citi's product offerings. We are trying to build a new business which doesn't exist--not just at Citi but anywhere in the market here.
We already have banks providing that service in India. What is the differentiator for Citi?
We are the leading investment banking and sales and trading house in India already, so our ability to go and show the most interesting initial public offers to our clients is not something many others can do. It's the same with fixed income, structured products and other capabilities. Others will do very well in the affluent segment, but they are not used to service levels at the top-end.
What is India's share in your private banking revenues?
At the moment, India's share is quite nascent. Worldwide, we serve a lot of Indian billionaires, but on the domestic side, it is still a growth market. Five years from now, India will probably contribute about 10 per cent in terms of overall profitability of private banking. The Asian contribution will be 40 per cent, compared to around 26-27 per cent now.
Have the parent's problems hampered client acquisitions in India?We certainly have had our share of challenges, but we have worked very hard to get back the firm into good health over the past two years.
You succeed off your strengths and Vikram had a very clear view. In private banking, in corporate banking and trading, we are going back to basics. So, the focus of all our businesses is on our client franchises and in helping them succeed by building the right relationships. Our clients have felt that on the ground.
We recognise there is a lot of trust to be rebuilt in the industry. Citi, too, has to rebuild trust, but anyone in this industry who doesn't think they have to rebuild trust is delusional.
At what stage of development is the Indian private banking industry?
It is definitely in an early phase. The critical piece is not only the product development, but also transparency in how clients should be investing in products and that they should work within the regulatory framework. There is an old style of private banking that has gone on in some parts of the world such as Switzerland and a torpedo has gone through that.
That is not the modern private banking that most of us will invest in. So, education and transparency in services are important in this phase of development.
How important is cash to clients at this stage?
During the crisis, cash became a destination in itself in a major way. We all learnt the hard way that liquidity matters, and I think you will see an enduring trend of cash or cash equivalents being important so that clients don't get caught short with a lot of wealth trapped in illiquid assets.
The other piece is the number of significant investment opportunities clients want to be liquid enough to invest in. Last year was a beta trade phase and you have to be an alpha this year. The beta trade is gone and the yield is tougher to get. And so people need more selective advice on where to invest.
Is capital protection still the dominant theme?
Yes, it still is. It is absolute performance on the downside that clients worry about. They are not satisfied if they lose less money than others. So, there is a bruising that has come from the industry not having done a good enough job of protecting clients from the debacle. And, that's where the trust needs to be rebuilt.
Will the focus remain on big cities, since there is also a lot of wealth being created in smaller cities?
In private banking, we are in the investment stage right now. So, we are focusing on bigger cities. We will build the footprint, as we go along. Distribution is important for us in this country. But, in the evolution of our private banking business, we have a long way to go even in big cities.
If you look at the US clients, they have already monetised, whereas in Asia, there is a very strong linkage between business and private wealth, as it is Latin America.
That is why, it is important for us to have the private bank and the institutional business work closely because these regions are still in the wealth creation phase.