Citigroup is meeting the financial crisis head on. Despite the turmoil surrounding the collapse of the bank in the United States and the echoing effects felt around the world, the bank has posted record second quarter results – in more than one way.
Aside from reporting healthy earnings of $4.3 billion, the past quarter marked the beginning of a new kind of Citigroup; one that is more focused and increasingly global-minded.
“This quarter marks a key milestone in our plan, as we are now reporting our financial results to reflect the separation of Citi into two primary operating segments: Citicorp and Citi Holdings, said Vikram Pandit, Citigroup’s CEO.
The company will now focus on its global business, Citicorp, which Pandit says will be the source of the group’s long-term profitability and growth.
The group has already begun to sell off some of the assets under Citi Holdings, indicating a plan to liquidate that side of the group’s operations in favor of focused growth in other areas.
Meanwhile, Citigroup Egypt has managed to keep its operations relatively stable despite the effects of the global financial crisis and the problems faced by its parent company in the United States.
All in the family
“We’re all part of the same family so I can’t come back to you and say we are in no way impacted by what happened to Citi in the United States, said Tarek El-Nahas, Citigroup Egypt’s director of corporate banking and finance.
“Our operation in Egypt is firmly within the new area of emphasis, this is the part the bank wants to grow; there will be no change to Citibank’s operations in Egypt, he continued.
El-Nahas says that business as usual transactions at the bank are actually up from last year’s levels, though episodic business has been impacted as companies put acquisition plans, new project finance and other major undertakings on hold until market conditions stabilize.
He predicts, however, that this period will be short-lived, and that local companies will begin to take advantage of improving economic conditions to initiate major moves.
“This period is ending, I think. [Earlier this month] Actis bought a stake in CIB; this is a vote of confidence in the Egyptian market and we’re going to see more of that. Investors are interested in what Egypt has to offer, he said.
Local attractions
The group’s position in Egypt has been bolstered by a strategy, implemented in 2007, emphasizing the needs of local companies and focused on products to promote their growth on a global scale.
“Globality is the major edge that Citi has over our competition. We take local companies global and capture international capital coming into Egypt.
As an Egyptian, I’m most proud of helping local businesses go global and I’d like to think that we have helped achieve that for several of our clients, El-Nahas explained.
It doesn’t hurt that Egypt is becoming an increasingly intriguing location for foreign investment even in the midst of the downturn, a trend, El-Nahas says, that could positively impact the country’s economic growth in the long term.
“Egypt is attractive for investors right now because it’s mildly impacted by the crisis, has a large population, a diversified industrial base, and a big market for whatever industry you’re going to get into, he said.
Egypt also stands to gain from the deeper problems faced by businesses in developed economies, who are looking to cut costs more than ever.
“I think there will be a gradual shifting of businesses that are labor and energy intensive from developed countries to less developed countries and Egypt could benefit from that. This has happened in the past, but I think the situation could prompt companies that haven’t made this move previously to do it now, he explained.
The bright side
Aside from the growth potential prompted by the crisis, El-Nahas says that the turmoil has led to smarter business practices both in Egypt and abroad.
“The crisis prompted people to slow down and reflect and I think that this is positive and will happen across companies and sectors, he noted.
Banks, according to El-Nahas, are starting to reexamine pricing and lending strategies that haven’t been looked at in a long time, a positive step, he says, towards a new era of intelligent, focused business.
For Citi Egypt, at least, this period of reflection has led to greater focus and innovation within the company. For El-Nahas, innovation is the key ingredient to surviving and thriving in the wake of the crisis.
As always, the group’s products are based on customer and market demand, but that demand has begun to move in a new direction as a result of the squeeze.
“As traditional markets shrink and credit appetites come down, there is a need for new strategies. The international status quo along with the needs of local companies has resulted in a situation where the bank is more in demand, said El-Nahas.
“At this point I have to meet my clients’ expectations by offering them new products at competitive pricing to increase my market share, he continued.
Beyond the crisis
That’s what Citi Egypt will continue to do into the future, relying on their global know-how and innovation to expand market share locally and capture new foreign investment coming into the country.
“Our strength is in trying to consistently introduce new products, this is the value added aspect of our business. The ability to raise equity and debt in non-traditional ways is becoming very important and our clients are increasingly turning to Citi for our product knowledge and the international network that will take them to the next level, explained El-Nahas.
The group is looking into the possibility of expanding to different market segments including SME’s, though El-Nahas maintains that this is still in the research phase and that any expansions will be predicated on the availability of new products appropriate to both the group and the segment.
El-Nahas concluded that the health of the group’s portfolio and the continued buoyancy of its business as usual operations provide a strong foundation into the future, whatever it may bring.
“In Egypt we have a very large capital base, and thus legal lending limit. Our portfolio is strong and asset quality is good. We will continue to grow with focus on the right sectors as well as achieving appropriate returns on our portfolio.
To read the other stories in our monthly special focus on Egypt s banking sector, click here:
http://thedailynewsegypt.com/admin/article.aspx?ArticleID=23428
http://thedailynewsegypt.com/admin/article.aspx?ArticleID=23429
http://thedailynewsegypt.com/admin/article.aspx?ArticleID=23431
