Citigroup on the prowl in region - Asia - Brief Article

Business Asia, May 19, 2000 by Alan Wheatley

The Sponsor

Citigroup, fresh from a big acquisition in Taiwan, is bullish on Asia and is looking to do more deals both in banking and insurance.

Speaking during the annual meeting of the Asian Development Bank this month, senior executives of America's largest financial services firm also expressed guarded confidence about Japan's economic recovery.

But they criticised the Japanese government for dragging its feet on deregulation and nursing the country's battered banks back to health.

"When Asia got into trouble in 1997, we stuck with it ... and we were there for them," Citigroup vice-chairman Bill Rhodes said.

"We're in Asia for good times and bad. We're very optimistic on Asia and the comeback and we're looking to expand our franchise here, both on the corporate side and the consumer side and the transaction in Taiwan is part of that."

Citigroup announced this month a US$700 million deal to acquire 15 per cent of five companies of the Fubon group, one of Taiwan's fastest-growing insurers.

"There are a lot of things that you will see us doing as we move along.

We're looking at a number of transactions across the region," Rhodes said.

Citigroup is the parent company of Citibank, which has been sponsoring the Business Asia Awards for seven straight years.

Bill Ferguson, Citibank's Country Corporate Officer and Head of Global Banking in Australia, has been a significant supporter of the awards.

He says the sponsorship has proven complementary to Citibank's activities in the region because many of the bank's Australian customers have business and trade links in Asia.

Citibank has been operating in Asia since 1902.

Stephen Long, head of Asia-Pacific corporate banking at Citibank, the group's banking arm, said he had been surprised by the relatively small number of acquisitions by foreign banks in Asia since the currency crisis almost three years ago. A big reason, he said, was price.

"I don't think there's been firesale prices," Long said. "We look at everything, at all of the major markets, and we've bought some small portfolios. But it's been minimal. There hasn't been the kind of activity you'd have thought there would be when you look at the crisis."

Long, voicing the consensus among bankers attending the ADB meeting, said Asia's banks had made sturdy progress in cleaning up their balance sheets over the past two years. But with the task of bolstering their capital base still not over, banks were still too weak.

"I don't think that they're in a position today to support any sustained economic recovery without recapitalisation of the system," Long said.

Rhodes said recapitalisation and restructuring could not be expected to happen overnight, but he was worried that Asia's snapback from deep recession was causing some governments to go easy or slow down their reform drive.

"Crisis breeds a real effort to reform. Crisis destroys complacency, and in some countries in Asia complacency is something that must be guarded against," Rhodes said.

Japan, which Rhodes said had been in denial for many years about the extent of its banks' problems, also could not afford to relax.

"You need to see finalisation of consolidation in the banking system because one of the things we learned out of Asia and the debacle in Russia is that if you don't have a safe and sound banking system ... you're in no way able to absorb economic shocks," Rhodes said. "Nor are you going to get back to sustained growth."

-- Reuters