'Clients Are In Risk-management Mode'

'Entering India is exciting, but it's also challenging. You have to be prepared for long-term investment.'

Even after exiting the consumer business, Citi continues to be the largest global bank in India by revenue and a banker to Indian clients in 70 countries while managing 8 per cent of India trade flows.

Jason Rekate, global co-head (corporate banking), talks to Subrata Panda and Manojit Saha/Business Standard on uncertainties due to global tariff wars, how Indian companies are navigating these challenges, and why India continues to be an important market for the American lender.

How is Citi helping its corporate clients to navigate this uncertain environment of tariff wars?

This year has been hard to predict. It was expected we would have relatively strong capital-market activities and a lot of other deals.

However, there has been a notable pause because of the uncertainty now. Most global largecap companies we deal with want to be sure before they make big decisions, big bets, and big investments, and look at merger and acquisitions (M&As).

They know what the world is going to look like. And it has been a little bit hard to tell.

Is your corporate banking business getting impacted because of tariff-related uncertainties?

Everything is being impacted. The needs of clients change, depending on economic circumstances.

Right now, clients are in risk-management mode. They are worried about currency rates.

So we are trying to help them with our ideas about how the rate environment is likely to change.

We are watching if any of our clients feels stressed. But, the answer is "no".

I am not seeing particular stress in global companies and multinationals. Their balance sheets are in good shape.

There is more discipline generally in the way people have thought about leverage and liquidity levels since Covid.

During the pandemic, companies figured out they might want to run slightly more conservative balance sheets focused on cash flow and liquidity.

That change in behaviour has been there since the pandemic and continues.

Companies are comfortable to stand by and see how this develops.

How is Citi's India business performing from the global perspective?

Citi continues to be the largest global bank in India by revenue even after consumer divestiture.

The India franchise for us is among the most important in our global network.

It includes the business we do with Indian companies, financial institutions, the government, and also multinationals coming to India.

Foreign companies and Indian groups make it a top three franchise for us. It has always performed well on both.

Citi India saw 16 per cent year-on-year growth in revenue (net of interest expenses) and 33 per cent growth in profit in FY24.

We have probably the strongest corporate-banking franchise among foreign banks in India. We have a strong market share with them.

But I also want to be an important bank for Asian companies, European companies, and Latin American companies that come to India because I think everyone's seeing an opportunity here.

How is your lending business performing in India?

Lending is a tool we use to support our clients. But we want to be a full-service organisation to all of our clients.

We work closely with the rest of CitiGroup to provide solutions and products companies need.

We desire to be an advisor to our clients on acquisition, raising money, and risk management, and when they need foreign-exchange solutions and risk-management solutions.

The thing that we are most powerful in is in our service business -- cash management and custody.

Despite companies being in good health, private capex in India is not picking up...

I look at the way industrial policy is executed all over the world.

In the past few years, Indian government-related policies have been supportive, especially things like the production-linked initiative.

I focus on the largecap sector. And there has been much improvement in India in sectors like aviation, automotive, and electronics.

India has moved away from being a country that was relatively strong for its own domestic portion to becoming a global player in many of these things.

And that's a fairly recent phenomenon. And it is inspired by some of those government policies and also a sophisticated management class in the country.

In India which sectors do you think will drive investment in the short to medium term?

Electronics will be a big one. There has been a shift. The world wanted to diversify the electronics manufacturing bases. China still plays a big role there.

India rightly saw that as an opportunity and has demonstrated not just the ability to industrialise electronics manufacturing but also to do it by maintaining a high quality.

How do you see the corporate pipeline in India?

It's strong and a lot of it is based on funding. When I say "funding", I don't mean just bank lending.

But there is an interest in doing things in the capital markets through initial public offerings (IPOs).

Citi worked closely with Hyundai. I think there will be more of that.

And we are likely to lead the charge in helping companies do that because we understand how that market works.

Another really good source of diversified funding for Indian firms is export-credit agencies (ECAs).

There's a lot of interest from global ECAs in providing funding into India.

Last year was good for IPOs. But going ahead, do you think activities may slow?

They are certainly slow this week. I think everyone wants some stability in the situation and then they can react to the new reality. The world is going to be different.

So, once we have a more stable understanding of how the world's going to look, IPO activity is going to pick up quickly because what we are seeing now is just a big pause.

It's difficult to make an investment decision when you are not sure what the input costs are going to be.

Growth is still the top target of most companies. So, once things are clarified, the rest of the year is going to be busy.

Any particular sectors where Indian companies are most active in expanding their overseas presence?

Electronics and automotives.

Are Indian companies nervous because of the trade war situation?

I have met a lot of companies across different sectors. They are behaving like largecaps from the United States, Europe, and Latin America.

Everybody wants to know what we think. Will it lead to recessions? What's going to happen with rate cutsRs I don't think it makes people nervous.

We have a lot of insights there and I'm happy to give them comparative notes and say here is what I'm seeing in this sector ... in this country.

There is going to be a structural reset. Trading patterns will change. Supply chains will change. And companies will have to adjust.

What kind of growth are you envisaging in the next three-five years for Citi in India?

We expect our Indian business to continue to grow strongly. A lot of that will be by helping companies that have the ambition to grow globally, either through export or investment.

I think these changes in trade relations will generate foreign direct investment, bring more foreign companies here, and expand the operations (of the existing firms).

Entering India is exciting, but it's also challenging. You have to be prepared for long-term investment.

You have to have patience to make those investments pay off.

Feature Presentation: Aslam Hunani/Rediff.com