Citi focussed on responsible financing: Vikram Pandit

Citigroup chief Vikram Pandit is on his maiden visit to India since he took over the beleaguered global financial giant. His visit comes at a time when Citi is pushing forward with its back-to-basics strategy which includes restructuring its operations and focusing on emerging markets like India. Speaking to CNBC-TV18's Shereen Bhan, Pandit said that Citi was closely studying RBI's discussion paper on foreign banks.

With strong focus on India, he says, Citi believes we can serve more clients than what we are serving today. "So we are looking at the paper with real seriousness. And, its one way for us is to provide the kind of services to the Indian consumer and the Indian companies and go deeper into India."

Pandit also spoke about the recovery in the US, which, according to him, has been happening at a fast pace with companies hiring once again and jobs being created. "We wish that there were more jobs being created but this is going to take time. Frankly, we are at a better place than what most experts would have expected few months back. Eventually overtime America will drive the growth in the US and will create jobs that are necessary even if it takes a little bit of time," he said.

As far as the India's model of growth is concerned, Pandit firmly said that the same has changed in the last the three years. According to him, the new drivers of growth are consumers from emerging markets, which are causing dramatic shifts. He feels that the imbalances that have caused crisis are yet to be worked out.

He is confident that Europe's debt situation will get resolved. He also said that emerging markets understand each other better. India is at the crossroad of all emerging markets and one should never underestimate the propensity of the Indian consumer.

Talking precisely about banks, Pandit said that banks have to adjust to the new growth drivers and need to earn the trust that has been lost.

"Banks have to become banks again," he added.

He believes that there will be a rise in the corporate banking and infrastructure debt financing in India. Moreover, he also feels that the banks in the US are also working towards inclusive growth and it should be a core mission of the bank to make financial inclusiveness.

Below is a verbatim transcript of his interview on CNBC-TV18. Also watch the accompanying video.

Q: I want to pick up on a comment of yours that you made on February 15 in New York, you said, "Many emerging markets are operating as on your capacity and therefore at the risk of overheating and must deal with the consequences of inflation." India is expected to grow between 8.25% and 9%. We have got a huge inflation problem at this point in time on our hands. The current account deficit is uncomfortable. Do you think India is at the risk of overheating? What are your thoughts?

A: These are all challenges of enormous success. How many countries grow at 8% to 9% a year? Really if you step back what a successful story and only the leaders of the nation and the business people and the people of India, are we really proud of what they have accomplished with a very stable financial system.

Of course those of us who come here occasionally see that India's confidence in its future is clear and we too are proud. We are facing those challenges that come from wonderful strong growth and we have embarked in a new era of growth. But we have got all the elements in place to be able to deal with these things.

From the government structure, strong financial institutions, entrepreneurial communities and everybody is focused on the supply side and what can we do by increasing capacity whether it is through infrastructure, whether it is through dealing with crude and agricultural productivity and for that matter with the work is in progress to deal with these challenges but again keep focusing on the success story and the new era of growth that we can build from here.

Q: So you don't think we are at risk of overheating here in India at this point?

A: I would say to you that India is no different than many other emerging markets around the world. They have had tremendous success coming out of this crisis and the growth has been very strong and each central bank is dealing with the shorter term issues they are facing but each government is also dealing with the longer term possibilities of dealing with supply side economics.

Q: Emerging markets are the big bet as far as Citi is concerned, more than half of your earnings and your revenues are from emerging markets. How does India stack up in Citi's emerging market basket and what would Citi India's contribution really be to Citi globally?

A: We have been here since 1902 and through the good times and the challenging times all the way through we supported about 45,000 Indian companies and millions of Indian citizens. It's one of those businesses we are really proud of. We have a deep heritage here and we have been here long before people considered it to be fashionable to be in the emerging markets and we carry that with pride.

Q: So since it is now fashionable for everybody else to be in India how competitive is the landscape and given the kind of competitive landscape that you are faced with how do you actually see Citi India performing and if I would ask you to stack up India against China what would it look like at this point?

A: I think competition is good. I think it really does bring out the best in people in terms of services they can offer, the value they can offer. Our competition starts on the ground in serving our clients. Look at where India is in the world, it's at the crossroads of what's driving world growth.

The emerging market consumer, globalization particularly the fact that we have gone from a developed market to developing market in back, sort of a hub and spoke model to a networked world, emerging markets to emerging markets and then of course innovation as a driver of growth. You look at all three, we are exactly at the crossroads of that.

If you look at Citi and look at Citi in 109 countries, emerging markets particularly, around the world, our record of innovation and understanding how to serve clients we too are the crossroads of these global trends and bringing the two together we think is going to be a big part of our strategy and that's exactly what we are doing and we are doing that by helping our clients in India take advantage of these changes.

Q: So what would that mean in terms of a number, in terms of rate of growth for the Indian operation? Somebody like HSBC in Asia has done over 21% in terms of growth. What would your rate of growth be here in India for Citi India?

A: Our rate of growth should follow how our clients grow and so we grow and our clients grow and we are profitable when our clients are profitable.

Q: Trying to be profitable at this point in time when growth is good so you must have an internal number.

A: Honestly we don't think about numbers in that way. If you think about India growing at 8% to 9% a year with a modest amount of inflation on top of that.

For most banks in India 20% growth rate should not be unusual without doing a lot of things different than just what they should be doing as core businesses serving clients. Now if our clients grow faster than that and if India grows faster than that we will too. Our core goal is to serve the real economy, serve our clients and we will grow with them.

Q: I want to talk to you about the regulatory landscape in India because the Reserve Bank has just brought out a discussion paper on foreign banks and whether subsidiarisation is the route to go. That would of course bring in caps as far as repatriation of profits are concerned and tighter controls. Where does Citi stand on this issue? Do you prefer the branch licence route or do you prefer the subsidiary route?

A: Our main goal has to do with serving Indian clients. We believe we can serve more clients than what we are serving today and that's the starting point. We are looking at the paper with real seriousness.

So one way for us is to provide the kind of services to the Indian consumer and the Indian companies and go deeper into India. But again we are going through this process right now, it's a new paper and we are actually looking at it with keen interest.

Q: But do you believe that going the subsidiary route would perhaps give you more meaningful presence in India or do you think tighter controls is something that would weigh you down?

A: We as I said in 109 countries, we operate with all models around the world and really it is less about controls or growth. It is really about what is the legal structure working with the regulators that can allow us to serve the number of clients and the type of clients we believe we can and actually we have to have the same goals, we and the regulators have exactly the same goals. As I said this is a paper we are looking at very seriously and it will be quite interesting.

Q: I will come back to a follow up question on that but let me talk to you about Citi. Globally, you have recently restructured your senior management but how confident are you of regaining your lost market share in areas like M&A, capital markets? I know that you have a strategy in place but do you have internal targets that you are hoping that you will achieve by the end of the year in order to reclaim your lost market share?

A:  If you look at India and look at how well we are serving our clients and we are doing a very good job and our clients tell me that. I have had the opportunity to talk to a number of them over the last few days. So it really is about how are you serving your clients. Are they happy and our goals again internally are about client satisfaction and are we doing everything we can to serve our clients.

We have restructured our businesses. We have gone through lots of transformations, strategic transformation is one, structural transformation is another. We have sold a lot of businesses and now our focus clearly is on being a global bank.

Q: Is there more rationalization coming or is the adjustment rationalization done with as far as restructuring your businesses is concerned and being asset like?

A: The big part of our restructuring was formation of Citi Holdings and formation of Citi Corp. Corp is a global business that's growing. It's serving clients and focused on how to grow with our clients. They are a part of Citi Holdings we made great progress with. But we still have some assets in their operating businesses and we are really focused on getting those businesses rationalized as well in a short period of time.

Q: The regulatory impact on earnings for instance the Basel III requirements have impacted the return on equity for some Banks like HSBC for instance? What are you anticipating in terms of regulatory impact on earnings?

A: If you look at the internal regulation it's been to bringing banks back to being banks to focus on the real economy and focus on clients. That's really important. If you as a bank have a strategy like we do at Citi Corp which is to focus on clients and to focus on real economy, there can be some changes on the margin, but they are not as significant as one can imagine because the core strategy is completely consistent with what the regulators have in mind and as I have said before we and regulators have exactly the same objective.

I would say a lot of the calibration is not yet finished in these things and of course that could affect what kind of returns one can earn but doesn't affect our core strategy which is focused on serving clients and particularly at these crossroads that are driving the new era of growth.

Q: On the Middle East and the trouble that we are currently seeing in the Middle East it caused a crude spike, how is that going to impact Citi's operations in that region and also what do you think this means in terms of the global economic recovery that we are currently in the midst of?

A:  We have been in North Africa for a long time and Middle East for a long time as we have in India. We have been through ups and downs but every time we have dealt with the challenges and we will here too as well. It's an important region for the world and we are focused on making sure that all the transitions are happening as methodically and as peacefully as they can but we keep watching just as everybody else has in the critical part of the world.

Q: Some bankers at this point of time were expressing the opinion that the time for remorse and apologies as far as the banking sector is concerned should be over by now. The trust deficit that we have actually seen with regards to the banking space over the last two years, have things improved? Are you beginning to see yourself build that trust deficit at this point in time, was the anger the public outrage continued?

A: It is important that the bankers acknowledge that the trust that they have with their customers have been lost through this crisis and rebuilding trust takes a very long time and you only do it by doing exactly the right thing for your clients and to us it's not only about focusing on clients but practicing responsible finance. Are you doing the right thing in the interest of the client, does it add any economic value, as these are systematically responsible? These are all important things.

Trust built over time as people experience you and I know that you are looking after their best interest. We have made progress at Citi. I believe the financial industry also has made progress. It's going to take a long time and you are going to go back and say I think we restored trust.  It is going to be very hard to know along the way exactly how you are doing.

Q: What has been the toughest part dealing with the last two years for you personally and how Indian are you really feeling, was there a feeling of karma when you were dealing with that problems over the last two years?

A: We all have a background and experiences that you bring to the situation. The toughest thing in any situation like this is about having the discipline, the courage of convictions to know that you have the right plan, to execute the right plan, to execute the right plan and I have a great team who made it really easy for me to deal with the discipline issue.

We were all completely focused on what needed to get done and it feels good to be here having really executed across the board on the plan that we had. Different cultures have different names for leadership and destiny. I do know Citi has a clear goal and our goal is to serve our clients and our goal is to be at the crossroads of what's driving the new growth.

Q: With regard to the US state recovery, we have seen some pretty good economic data emerge in this point of time, how confident and bullish are you feeling about the US economy?

A:  I am pleased to see signs of recovery. There is growth occurring. Companies are hiring back. There is employment availability in the US. Jobs are being created. We wish that there were more jobs being created but this is going to take time. Lots of different element came together to get us to this point.

Frankly, we are at a better place in some of who would have expected few months back, from hereon though we just need to see continuity of this pattern.

Eventually, over time you know America is an entrepreneurial country, wonderful democracy with all the elements of driving economic success no different than India. We will figure it out. We will drive the growth in the US and will create the jobs that are necessary even if it takes a little bit of time.

Q: So a special homecoming for you this visit?

A: Absolutely, it's always wonderful to be back in India and again I must say for somebody comes back occasionally to India you can really feel the difference.

Q: What is the biggest difference to your mind?

A: I think the energy of the young people here and the confidence they have in themselves and the opportunities that the country has going forward is great to watch and again I must say that leaders of the nation and the entrepreneurs, people should take great pride on what has been accomplished. I too am proud.