Citigroup to offer private banking in China http://today.reuters.com/business/newsArticle.aspx?type=ousiv&storyID=2006-03-27T171649Z_01_N27292502_RTRIDST_0_BUSINESSPRO-FINANCIAL-CITIGROUP-CHINA-DC.XML
Mon Mar 27, 2006
By Jonathan Stempel
NEW YORK (Reuters) - Citigroup Inc. (C.N: Quote, Profile, Research) said it plans on Tuesday to open its first private banking office in mainland China, in a bid to attract the wealthiest residents of one of the world's fastest-growing economies.
The largest U.S. bank said its new Shanghai office will serve people with at least $10 million of liquid assets, but intends to focus on clients with $25 million or more.
New York-based Citigroup is laying the groundwork for expected liberalization of financial services laws.
"It's about capturing a share of the future," said Damian Kozlowski, chief executive of Citigroup's private bank, in a Monday interview.
"There has been a huge shift from people creating wealth in their home country and moving it offshore," he said. "Entrepreneurs are now producing more wealth creation in their own country."
Banks such as Citigroup and HSBC Holdings Plc (HSBA.L: Quote, Profile, Research) already have large presences in China. Rivals such as Bank of America Corp. (BAC.N: Quote, Profile, Research) and Goldman Sachs Group Inc. (GS.N: Quote, Profile, Research) are making inroads by acquiring stakes in state-run banks.
Citigroup's private bank is trying to rebound after a 2004 scandal that led regulators in Japan to revoke its private banking license in that country, citing a breakdown in internal controls.
The new Shanghai office, Citigroup's first Chinese private bank office outside Hong Kong, is not for the masses.
Kozlowski estimates that 1,000 to 2,000 Chinese residents might qualify to be clients.
The private bank serves more than 6,000 high-net-worth individuals, with nearly $60 billion of assets, in 11 Asia-Pacific countries.
Worldwide, it has 26,000 clients, including one-fourth of the world's billionaires, and employs more than 4,000 people.
At first, Citigroup's offerings in China will be limited to some foreign currency products for Chinese residents, and foreign and local currency products for non-Chinese residents, the bank said. It hopes to later offer more products.
Citigroup is also trying to expand wealth management in Britain, Brazil and India.
It is in less well-developed countries, such as China, where the growth rate might be greatest.
"There are huge amounts of wealth creation, especially given the disproportionate growth of those markets relative to the developed world," Kozlowski said.
Last year, the private bank's profit totaled $373 million, up 17 percent from 2004, when it took a $244 million charge to exit Japan. Excluding that charge, profit fell by about one-third.
Kozlowski became head of the private bank last June, after running its U.S. operations. His predecessor, Peter Scaturro, was ousted in October 2004 amid the Japan regulatory problems.
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