Sydney/Melbourne: Citigroup expects to grow its $6 billion-plus Australian private wealth portfolio by a quarter this year as clients plough cash back into investment markets, a Citigroup executive said on Tuesday.
Australia’s wealthy investors deserted stocks and managed funds in the global financial crisis, preferring high-yield state-guaranteed bank accounts, but are returning to markets now that values have rebounded and the outlook has brightened.
“In the last three to five months, we have had cashed-up customers ask, ‘Is it time to re-engage with the market?’. Overall the outlook is turning bullish,” said Roy Gori, country business manager.
He said customers has begun looking at stocks in Australia and offshore developed markets and dabbling with structured mortgage-backed investments.
Citi, which counts the buoyant Australian economy among its top 10 markets worldwide, expects strong inflows to continue from its 70,000 wealthy customers down under.
Citi is repositioning itself to focus on the 2 million Australians it classifies as either affluent or “aspiring” to be affluent, after virtually all of the mass market was scooped up by the four major domestic banks.
“We want to be the 600-pound gorilla in the affluent customer segment here,” Gori said, adding Citi globally has earmarked Australia for growth and investment.
The bank aims to double its branch network, increase its base of credit card customers by one-third to 1.6 million in three to four years and sees opportunities emerging to buy asset portfolios as lenders face a rising cost of funds.
“We will see more activity on the acquisition front as the business model turns on its head. Institutions will get a lot more judicious and look at best uses for funds,” Gori said, adding Citi would look at portfolios over $200 million.
Over the last 15 months it has picked up credit card portfolios worth $250 million each from Bank of Queensland and Suncorp Metway, he said.
DEBT CAPITAL, ACQUISITION
On the advisory side, Citi expects to thrive on debt raisings this year and has a strong pipeline of M&A transactions in the works, its country officer Stephen Roberts said.
Roberts said on debt advisory, where Citi sees itself having a leg up with its global platform allowing its Australian clients to raise debt in the US, Europe and Japan, the market is unlikely to abate, with banks having to raise funds and companies refinancing debt.
The bank recently lost one of its bond originators to expanding rival Nomura but has wasted no time in replacing him.
“We’ve selected a candidate, only because the volume of business is so high we want to have as many bums on seats as we can in that business,” Roberts said.
Citi was joint bookrunner with Goldman Sachs and HSBC for a $3.5 billion global bond issue for Commonwealth Bank of Australia last month and expects to be active in further bank issues.
On mergers and acquisitions, where Citi ranked 11th last year and 14th so far this year, Roberts said deals were percolating across most sectors, including financial services, mining, energy, utilities and property, with a few multibillion-dollar deals bubbling.
“There are always a couple of elephants out there....We are working on a few,” said Roberts.
Citi’s biggest deal in Australia so far this year has been as joint adviser to coal seam gas producer Arrow Energy on a A$3.45 billion ($3.2 billion) takeover offer from Royal Dutch Shell and PetroChina.
“We actually define success in the Asia-Pacific region as success in China, India, Japan and Australia,” Roberts said.