Feature: Citi redraws its wealth management map

The US institution cuts more than 100 jobs in its Asian wealth management business as it faces up to the unforgiving financial environment. But its regional wealth management head, Aamir Rahim, tells Leigh Powell that while business integration is key, his private banking operation will not be swallowed by the consumer bank.

  • 03 Dec 2008
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"We are in an environment where we all have to look forward, where there is no road map that you can follow, which makes my job particularly interesting," quipped Aamir Rahim, the chief executive of Citi's Asia-Pacific wealth management business.

The fixed income stalwart was only parachuted into his present role in August this year following the resignation of Citi's 20-year veteran Kaven Leung, whose snatch by Goldman Sachs was an industry coup.

Rahim's promotion coincided with the beginning of a broader structural reorganisation at Citi as the sprawling US institution strives to better integrate its businesses to traverse a testing financial terrain. It also came less than a month before the collapse of US investment bank Lehman Brothers, which sent global markets into a vicious tailspin.

As Citi's former co-head of fixed income, currencies and commodities as well as capital markets origination for the region, Rahim clearly brings product knowledge to the table.

But if he was brought in to the wealth management business to increase product sales, he had better hope his New York paymasters will exercise patience given the market environment and rank risk appetite.

Speaking to asiamoney.com from a corner office of Citibank Tower in Hong Kong last month, Rahim was honest in his assessment of where the wealth management industry was headed.

Citi has earned a deserved reputation for innovation on product development, but Rahim acknowledged that this segment, like many, would face intense pressure.

"I think that we need to pretty much forget about the way we used to do business," he said, suggesting that Citi would be rearranging its resources. "We are in an environment in which conventional wisdom has been turned on its head. Any way you look at it, the past is not a guide."

Asked what the adverse conditions would mean for Citi's products business, he responded: "Our product offering is going to have to adapt to the environment we see coming, but it's going to be different that's for sure."

He suggested that the bank would need to go back to basics to help clients indentify firms that are going to do well in this environment. He also cited potential opportunities in distressed debt and property fire-sales in Asia, the US and parts of Europe.

And when it comes to structured products, the derivatives specialist takes a long-term view. "The appetite for risk will come back. The way people take risks will change, but structured product is part and parcel of the landscape and the spectrum. The only thing to think about is the appropriateness of the product and the appropriateness of the client, as well as the regulatory regime going forward."

Strategic cuts
Rahim quickly confirmed that Citi was re-evaluating its business strategy as it looked towards next year. "The entire street is firing people. I don't think there will be a single firm that is untouched by the environment in terms of right-sizing or relooking at their business model and how they do business."

The US institution's global chief, Vikram Pandit, in mid-November revealed that Citi would eliminate 52,000 jobs over the next year, or about 15% of its 350,000 global workforce.

And asiamoney.com can confirm that in the past two weeks, Citi has made more than 100 job cuts within its regional wealth management business. Prior to the cuts it had about 1,500 staff across its Asia (ex-Japan) wealth management business, including 400 bankers and investment specialists.

This comes as little surprise. The bank reported a 10% year-on-year decline in global wealth management revenue in the third quarter to US$3.16 billion, and a 26% decline in net income over the same period, to US$363 million. Citi's Asia wealth management franchise has even underperformed this, with revenues dropping 27% year-on-year in the third quarter to US$608 million and a 58% fall in net income to just US$59 million.

When asked which regional wealth management operations he considered Citi's closest rivals, Rahim grinned before saying: "In no particular order, HSBC, UBS and some combination of Credit Suisse and Deutsche Bank."

By way of comparison, HSBC announced in an interim statement that third quarter private banking profits were simply "below" those of the corresponding period in 2007, although it did reveal net new money of US$15.6 billion including a record September. UBS, meanwhile, unveiled a 21% decline in third quarter net income year-on-year to SFr2.6 billion (US$2.1 billion), although this refers to both its international and Swiss wealth management business (it does not break down its Asia numbers).

Rahim defended Citi's regional results, pointing out that the group's private banking business targets clients with US$10 million and above in net worth.

"For a truly accurate comparison, you will also need to include our consumer bank's Citigold and Citigold Select businesses (which serve the mass affluent and US$1 million and above segments)," he said. "High-end clients tend to be more sophisticated in the way they use products. They tend to be a lot more aggressive with their risk appetite, and when the market slows down they back off very quickly, and rightly so."

Citi also saw a 19% decline in client assets under fee-based management globally during the quarter, although Rahim was adamant that Citi was flat in terms of regional net asset outflows and inflows, attributing the bank's decline in AUM to the downgrading of portfolios in US dollar terms because of foreign exchange differentials.

"What I call banking assets in Asia, deposits, the purest form of credit worthiness and clients' confidence in us, are flat within the private bank this year," he stated so as to leave no room for doubt.

He also denied that Citi's private banking business had felt the effects of reputational damage the institution has suffered from the US sub-prime debacle, which led the bank to make huge writedowns and go knocking cap-in-hand on the government's door. "From the evidence [of assets under management] we are still doing as well as we were earlier this year or before any of the major news hit the wires regarding sub-prime and all of that," he said.

Business evolution
Rahim was realistic about the industry's near-term prospects. "The concept of managing wealth is evolving to meet the needs of an evolved market. People are looking for wealth preservation. I think you should reduce leverage, or cash out and wait for what I think will be the opportunities of a generation. If you are sitting on liquidity you are going to have huge opportunities in the next 18 months to redraw your personal wealth map. I really think this is the point in time where the billionaires and millionaires of the future are going to be defined."

But he rejected market speculation that Citi was contemplating spinning of its wealth management business or combining its private bank with its consumer bank, which houses Citi Gold account holders, with between US$100,000 and US$1 million under management, and Citi Gold Select clients, with US$1 million to US$10 million.

"There is no single business model in the industry that covers every segment from mega-wealth billionaires to ultra high-net-worth, high-net-worth and mass affluent clients," he said. "A one-size fits all approach doesn't make sense from a client's perspective. A billionaire has very different needs to, say, a mass affluent client.

"We [the private bank] operate on a US$10 million-and-up net worth basis because that is where we think we can start adding value to the client relationship. The proposition that is covered by the consumer bank is very different from that covered by the private bank. So for wealth management to gobble consumer or vice versa, it kills one proposition for the other."

In the longer term, Rahim stressed that Citi would prioritise building an onshore wealth management business in India.

He added: "The other point we are focused on is graduating towards the one-Citi platform. Rather than have a series of disparate parts [of the overall bank] that were segregated, we are trying to bring them together in terms of our client segmentation, how we build our back office and how we provide our services. We are rethinking the way we do business and are moving ourselves towards a merger that needed to be done a long time ago."

Perhaps the global financial crisis is finally helping to concentrate Citi minds on the group's long-stated ambition: to build a truly seamless universal bank.

  • 03 Dec 2008

Bookrunners of International Emerging Market DCM

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 17 Oct 2016
1 Citi 38,857.97 184 9.39%
2 HSBC 38,447.58 227 9.29%
3 JPMorgan 34,744.34 142 8.40%
4 Bank of America Merrill Lynch 28,556.15 119 6.90%
5 Deutsche Bank 18,270.77 72 4.42%

Bookrunners of LatAm Emerging Market DCM

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 18 Oct 2016
1 JPMorgan 13,268.07 33 6.30%
2 Bank of America Merrill Lynch 11,627.56 29 5.52%
3 Citi 11,610.06 30 5.52%
4 HSBC 10,091.34 29 4.79%
5 Santander 9,533.17 25 4.53%

Bookrunners of CEEMEA International Bonds

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 18 Oct 2016
1 Citi 13,617.40 57 11.05%
2 JPMorgan 12,607.77 55 10.23%
3 HSBC 9,327.72 50 7.57%
4 Barclays 8,643.78 30 7.02%
5 Bank of America Merrill Lynch 6,561.15 18 5.32%

EMEA M&A Revenue

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 02 May 2016
1 JPMorgan 195.08 50 10.55%
2 Goldman Sachs 162.26 37 8.77%
3 Morgan Stanley 141.22 46 7.64%
4 Bank of America Merrill Lynch 114.20 33 6.18%
5 Citi 95.36 35 5.16%

Bookrunners of Central and Eastern Europe: Loans

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 18 Oct 2016
1 UniCredit 3,966.12 27 13.01%
2 SG Corporate & Investment Banking 2,805.90 16 9.20%
3 ING 2,549.27 20 8.36%
4 Citi 2,526.98 15 8.29%
5 HSBC 1,663.71 16 5.46%

Bookrunners of India DCM

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 19 Oct 2016
1 AXIS Bank 5,944.45 123 18.53%
2 HDFC Bank 3,792.05 100 11.82%
3 Trust Investment Advisors 3,390.86 145 10.57%
4 Standard Chartered Bank 2,299.63 31 7.17%
5 ICICI Bank 1,894.86 51 5.91%