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Citi to Boost Corporate Lending in Europe Amid Coronavirus Woes

Moving on with the restructuring moves, banking giant Citigroup C is likely to expand its commercial banking operations across Europe, Middle East and Africa (EMEA), Reuters reported. The move comes on the heels of the opportunities foreseen as competitive firms moving out from the region after witnessing negative impacts of the coronavirus-induced recession.

Per Citigroup’s plans, the business lending division aims to cater to companies with annual turnover between $25 million and $2.5 billion. Also, new hires and office launches in various Western European countries¸ by the end of this year, are in the pipeline.

“If you look at European banks right now, many are refocusing as national champions, selling off or reducing marginal overseas businesses where they didn't have scale,” said Ray Gatcliffe, head of Citi Commercial Bank for EMEA.

Per Gatcliffe, despite the credit-loss fears triggered by the pandemic, this is the right time to expand in this region as competitors are cutting down their lending to smaller, fast-growing companies. "A lot of companies in EMEA have been impacted by their banks reducing global and even regional footprints. We've kept our global network and think that will resonate with clients seeking to expand internationally," Gatcliffe further noted.

“It's not an inexpensive proposition to have local banking licenses across the globe as we do. There are important opportunities and obligations attached to having such a broad geographical footprint,” he added.

Operating in 55 countries in EMEA, the commercial banking unit of Citigroup, catering around 5,000 clients in the region, has only offices across 15 countries, and serves from centers, such as Dublin, Dubai and London, in another 21. Notably, the 15 offices are mainly in Central and Eastern Europe, including Poland, Turkey and Russia.

Though nothing has been specified related to the location of the initial expansion, the bank targets a minimum of 10-20 new employees for each new office. Remarkably, Citi's UK commercial banking business, which commenced in 2017, has flourished all these years contributing 21% of EMEA revenues in 2019. Also, last year, Citigroup expanded its Digital Client business to 16 Western European markets, including Germany, Spain and the Nordics. The bank is also targeting FinTech companies with requirements of cross-border services.

Among others, HSBC Holdings HSBC and Standard Chartered SCBFF) came up with similar moves for winning business from small- and mid-sized European companies in the past few years, with the aim of boosting revenues in the market dominated previously by local financial firms.

Our Take

Citi continues to execute growth strategies, such as bolstering position in the booming digital industry and expanding its global market presence, thereby aiming to diversify revenue sources. Also, prudent expense management and inorganic expansion strategies keep us encouraged.

However, pending litigation issues might flare up legal expenses.

The company has lost 25.5% in the past six months compared with the 27.6% decline recorded by the industry. The stock carries a Zacks Rank #3 (Hold), at present.



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