Next six months to be quite telling for world, says Citigroup’s Jane Fraser

Citigroup may have sold its retail business in India as part of a global rejig, but the Wall Street bank is raising its wager on the fastest-expanding Emerging Market that boasts of the best digital infrastructure. Jane Fraser, CEO, Citigroup, says financial markets would remain volatile over the next few months and that Quantitative Tightening (QT) would lead us to a very different world. Edited excerpts:

You were here 25 years ago, and you are here now. What has changed?

The potential of the country I feel is a lot more tangible now – what’s being done with the UPI, the ability to roll out the digital architecture, in vaccination and in other areas. The country’s ability to realise its scale and convert is huge. Ease of business has become better. It is a pretty unique point in time for India (with regard to) the speed and scale of development. There is always a strong talent pool here. It is extraordinary; the calibre of the talent. You can feel India’s superpower potential being realised, rather than saying it. India is particularly well positioned.

Why do you think India is particularly well positioned?

On several different fronts….. Scale is really important. India has a scale that many countries don’t. India has become easier to do business – whether the UPI or some other frameworks being put in place. So, having a backbone here is not something a lot of different countries do have. The government has done a remarkable job of having been very visionary. That is very appealing. It gives people a lot of confidence (to make) India as a place to base centres of excellence for global operations of global capabilities. There is also the ability to reach a very large domestic market. Particularly given the dynamics of China and geopolitics, you don’t want to be too dependent upon China. You do need the scale, the quality and the efficiency. India is one of the few markets in the world that can provide that.

How does it really go with Citibank’s strategy in India, especially after deciding to sell the retail business?

The main piece for Citi wasn’t retail. We have been in the country for 120 years. India for Citi is something that has a huge impact on our firm’s history.

As a centre of innovation and centre of talent, one of my mentors was Vikram Pandit. Some of my top leaders hail from this country. Where we see the biggest opportunity for Citi and the role we can play for the country and the role the country will play globally is around the institutional client base. It is more connected and simpler in terms of business mix. There is no other global bank that has the depth and the presence on the ground that we have.

The retail franchise had a connect with clients…

The interesting pieces are commercial banks. Don’t think of Citi as just serving local business with a lending proposition. We serve the companies, which are born digital that are often rapidly globalising or that are part of big global chains. We do their foreign exchange, trade finance, all their liquidity management, receivables and payables. The transactions platform moves close to $4 trillion a day. There is no other bank that comes close to it. We serve 40% of unicorns here in India. They desperately want to jump on to us because we help them grow around the world. It is a huge engine for growth. Citi India is about how we connect the world to India and India to the world. How do we support the growth of Indian companies that need to tap global capital and bring in the capital to India? There are a whole lot of clients who are connecting to the Middle Eastern wealth funds.

Most global banks do institutional business here. What’s Citi going to do differently?

Citi is going to be doubling down in India. We are investing significantly in our capabilities on the ground here. That’s where the focus comes in. We are crushing the competition on the institutional side. We are looking at double-digit growth. Investments will be mainly on technology and talent. Probably, India will be our second largest market globally, of the 97 countries, after divesting the consumer business. We serve 30% of all MNCs operating in India. We serve 40% of unicorns and 8% of all of India’s trade flows go through us. And 5% of all of India’s domestic e-payments go through us. It is a very material bank.

Central banks across the globe are fighting inflation. There seems to be a divergence among central banks in dealing with inflation and growth. What does this mean for financial markets?

Different countries have different dynamics. They are positioned to act differently. India does not have the same inflation that we are seeing in other countries. We are seeing the central bank taking action due to the forex impact. The dollar is going to be strengthening for a while, I suspect. We are going to see Chairman (Jerome) Powell raise rates. Madame (Christine) Lagarde doesn’t have the same kind of freedom. What is happening in the market is a huge amount of volatility. It is likely to continue. We are starting to see quantitative tightening.

How is this tightening different from the previous ones?

Last decade, we had the ‘Fed put’ trade. Now you have got a relatively orderly shift in the market. Taper tantrum in 2013 was pretty chaotic. This time, you’ve got a stronger macro. But it’s the investors who are suffering and not corporates. Rates get anticipated in the market and we are at the beginning of the QT. The impact on markets will be challenging. In the US, we see risk assets are coming down. QT is the one that the world is keeping a close eye on. Next six months are going to be quite telling.

Is it the right time to start QT?

It is necessary. It is going to keep the volatility higher in the markets. We are in extremely able hands in Chairman Powell. There’s a lot of confidence, but that doesn’t mean it’s not going to be challenging. There’s an asset allocation change that’s happening.

Whenever central bank actions happen and bubbles burst, there’s a spill-over. Many markets are in bear territory. What are the risks?

Last quarter, (for) our entire corporate lending portfolio, we disclosed an actual loss of $18 million. I am not overly worried over credit quality. As a bank, you are constantly doing stress tests. Food security, energy security, Ukraine …recession, inflation….you are making sure you are ready for any scenario imaginable and testing the resilience. Balance sheets of most companies are very high quality. Weaknesses are in some Emerging Markets that we are seeing in one of our neighbours here. We can never quite account for geopolitical hits. Look at India! India’s GDP has been growing at 7-8%. It is a poster-child in many respects. I am not calling out for something that feels like a real crisis on the corporate side. I think it is tougher for investors than it is for corporates.

One thing that was different in the last bull market was the Crypto. Many are shuttering, halting withdrawals, filing for bankruptcies. How will that ripple through the system?

I don’t think it is a huge spill-over because banks are not participating in crypto by and large. The RBI’s stance is pretty clear here. The technology underneath this …blockchain and others have the potential to be tremendously positive with the right regulatory guardrails and framework around them.

We look at how they can be supportive of advances in digital architecture. The products need consumer protection. Similar ones that exist in the banking system need to apply to the Crypto world. Until there is regulatory clarity around the world, the main players in the financial system (will not) want to participate in terms of security and safety. I can quite appreciate why the RBI has concerns around it; I think the banking sector behaves responsibly. And that’s why there is no spill-over. Look at the financial system; it is trillions upon trillions and the Crypto is not that big.

What is the status of your Russian operations and asset sale?


Our operation in Russia has been rapidly shrinking down in size. We are supporting multinational clients, many of whom are looking to exit Russia. We are exploring a range of possibilities around the exit of our consumer and commercial banking franchise. In terms of Ukraine, we are the only American bank operating in Ukraine. Our people have done an extraordinary job with the Ukrainian franchise. We support payroll, global and local supply chains, work with major NGOs, and work on plans of reconstructions of Ukraine.

Last year, your prediction of a “brutal winter” to markets turned prophetic. What’s it this year?


Depends on where in the world you are. Europe could well be a brutal winter. I think India is extremely well positioned for what lies ahead. The opportunity is India’s to lose. I have no doubt that it will be India’s game. In the US, we are all going to be keeping an eye on whether it moves into recession in the next one or two years. The next few decades will be Asia’s. I see India as one of the superpowers and at the forefront of that.