Japanese banks pick up the pace

Business Asia, Dec 13, 1999

Asia's banking sector still faces major hurdles in 2000. Citigroup chairman SANDY WEILL comments on some likely trends and explains his bank's strategy for Japan and Australia

Q: Asia has rebounded strongly from its financial crisis, but do you see that recovery stalling?.

A: "I think you are seeing recovery across the broad base in Asia. I think it is very important that we have seen a bottoming out in Japan and now a slight increase, which I think is going to be very important to the Asian economy. Japan has embarked on financial services deregulation and I think that is going to lead to mergers in the financial industry and other industries in Japan, which has never happened before. I think you are going to see the Japanese companies realising that they have to be more efficient in dealing with world markets. They were very slow to come to a consensus, but once they reached that consensus I think they are moving very, very fast."

Q: Does Citigroup plan an acquisition in Japan?

A: "Our company made maybe the largest investment by an American company in Japan a year ago -- investing US$1.6 billion to buy 25 per cent of Nikko Securities and another US$500 million to set up a joint venture with Nikko and Salomon Smith Barney. That business has been operating for just eight months and it is running about US$1.25 billion in revenue and sits in the top tier in what is happening in the institutional business in Japan. We are in the process of buying the Diners Corporation franchise in Japan back from Fuji Bank. So we are looking to expand in Japan, yes. We have to execute and continue to execute on what we have done so that we really grow internally."

Q: The other giant in Asia is China. Does it have a less clear future?

A: "In the long term, China has a fantastic future. I think that they are approaching it steadily and going at a slow and steady rate, which is probably a lot better for a country that size than what we have seen in other places like Russia. The Chinese have demonstrated for centuries how good they are in doing a lot of things and I think we should continue to look for value in China."

Q: As far as Citigroup in Australia is concerned, what particular role do you see for the operations here?

A: "I think what we have done in Australia is really a great example of not just Citicorp and Travellers coming together with Salomon Smith Barney, but working with three other Australian institutions -- buying JP Morgan's asset management business, buying an investment banking business from NatWest, and just recently bringing in the retail broking sales force from ANZ. And I think that really has created a melting pot here with all the people that work together in Australia and hopefully we can use this base to expand to other parts of Asia. I think that we have a lot of talent and infrastructure here in Australia that can service not just these markets but do things beyond this market. I think Australia really can become a financial centre far beyond the country's boundaries."

Q: Any particular inventory of that?

A: "It's exciting what you have done here in creating the private pension system. You know everyone puts 7 per cent of what they make into a savings account and that rises in a couple of years to 9 per cent. It encourages people to think about how they can really plan for their financial future and that is a big part of our business. We are looking to grow our consumer business here. Just at the beginning of the year we bought the Diners Club card franchise here, which is growing dramatically and we are very happy with that."

Q: Where would you like to increase your market?

A: "Certainly Japan, where we have made a good start and which is the second-largest market economy in the world. I think the opportunities are really across the board: from what we feel we have to do to continue growing the investment banking presence in Europe, so that can support what we are doing in the Americas and Asia and around our global platform and we are investing very heavily in that. And in some of the emerging markets, we want our position to be substantially more than what they are."