Citi CEO Jane Fraser banks on revamped Middle East business to drive growth

The newly carved out Middle East, Africa and Central Asia cluster is vital for Citigroup’s global growth ambitions, as the fourth-largest US lender continues with its massive restructuring programme, chief executive Jane Fraser has said.

The cluster, which is separated from Europe, is home to some of the fastest-growing markets for the bank, such as Saudi Arabia and the UAE, warranting more autonomy.

The Middle East is more connected to North and South Asia than it is with Europe, and the business and economic trends over the next few years will confirm this, she said.

“It's a very important piece,” Ms Fraser, who has met clients and senior government officials in Kuwait, Saudi Arabia and the UAE in recent weeks, told The National in an interview.

“So, we’ve broken apart our structure to fit where the world is headed.”

The Middle East is also the home base for sovereign wealth funds and investors, including Saudi Arabia's Public Investment Fund as well as Abu Dhabi funds Mubadala Investment Company and ADQ, whose global reach and portfolios generate a significant amount of business and investment flows.

“From that perspective and all those other different pieces, there is a lot of growth," Ms Fraser said, adding that the region is going through a "golden era" economically.

The Middle East also leads in energy, sustainability and the technology space, is a global financial and investment hub, and those are “pretty big, hefty elements of the global economy and flows”, she said.

Over the past three years, Citigroup’s revenue in the Middle East and Africa has recorded double-digit growth and the region was the fastest-growing cluster globally for the bank in that period.

Economic diversification agendas being implemented in the six-member economic bloc of GCC has opened up new avenues of growth for international lenders such as Citi, as well as regional and local banks.

The structural reforms they have introduced have driven debt capital market activity, initial public offering momentum, as well as investment across sectors including in infrastructure, industry, technology and travel and tourism, among others.

Bright spots: UAE and Saudi Arabia

Ms Fraser sees growth in the region continuing despite global economic headwinds, especially in Saudi Arabia and the UAE, on the back of rising foreign direct investment (FDI) flows.

The UAE’s increasing connectivity with Asia, especially with China and India, make it a vital market for Citi, which has been present in the Emirates for six decades.

While investment and growth in international markets still remain in focus, there is a stronger local pivot and a push to bring investment into the UAE on the back of Cop28 success and the country getting off the Financial Action Task Force (FATF) grey list.

“We had many discussions about the domestic opportunity this time … supporting and bringing international investors in,” Ms Fraser said of her meeting with clients and officials in the Emirates.

“I was certainly challenged as to how we can look at different advanced manufacturing technology players and goods producers, bringing them to UAE.”

The country received record FDI of about $23 billion in 2022. Official figures for last year have yet to be released.

The UAE also came in second globally after the US in terms of greenfield FDI last year.

The Emirates has set an ambitious target of attracting Dh550 billion ($150 billion) in foreign investment by 2031 and be ranked among the world's top 10 FDI destinations, as part of its diversification strategy.

Ms Fraser expects FDI flows to the UAE to rise further as several of Citi’s multinational clients from across industries see the value of the country as an important growing industrial hub.

In Saudi Arabia, the government remains focused on the deliverance of its Vision 2030 programme and building out the vital elements, although the kingdom is “obviously reprioritising its investments”, she said.

Saudi Arabia’s Finance Minister Mohammed Al Jadaan this week said the kingdom would adapt to current economic and geopolitical challenges and “downscale” or “accelerate” some of the projects being carried out under its Vision 2030 plan, which seeks to diversify its economy away from oil.

Asked whether Saudi Arabia had to "mark-to-market" its expectations regarding the goals of the 14-year long programme, Mr Al Jadaan said: “Absolutely, yes.”

Ms Fraser said Riyadh’s move was “logical, pragmatic and what you would expect”, as the kingdom has a big and bold vision.

“I actually don't see them really scaling back as opposed to being clear about what ... they're going to prioritise.”

The recalibration of Saudi Arabia's vision objectives does not affect Citi’s business in Opec’s top oil-producing nation either, she said.

The bank is focused on channelling more international investment into the kingdom, deepening capital markets and supporting the build-out of various ecosystems.

It is also helping large Saudi “champion” companies expand abroad, as well as supporting the growth of smaller corporate clients in the domestic market.

“We're focused on the capital market piece at the moment because there's a lot of business there,” she said. “I still see a lot of growth.”

Market has 'not priced in' geopolitical risk

Downside risks, driven by geopolitical fragility amid the continuing Israel-Gaza war, as well as the flaring up of tensions between Israel and Iran, still persist in the region, she said.

“I do think the market has not fully priced in the geopolitical fragility in the world. So, I think that's something that we're all a bit concerned about,” Ms Fraser said.

“There's a little bit too much of an optimistic lens on it.”

The overall extent of the economic fallout of the war on the region will depend on what course the conflict takes from here.

So far, there has been “a relative divorcing” within the Middle East where many countries, including Saudi Arabia, the UAE and Kuwait, have not been economically affected by the war, while others have taken a hit.

However, if there is a “really bad escalation”, the situation will not be good for anyone, she said.

'Not the bank we were'

Ms Fraser, who took over Citi’s reins as the first female chief executive of a Wall Street bank in March 2021, has launched a strategy to reorganise and transform the bank in what has been called the biggest restructuring of the lender in decades.

She has pushed to simplify the leadership structure to make the lender ready for the digital age and be competitive with its more profitable peers.

She has been under scrutiny since launching the multiyear reorganisation strategy that involves divestiture and slashing jobs across the board, all aimed at cutting Citi’s cost base and improving returns.

“We're largely done with the exit of the businesses, which are not core and that don't support that vision,” she said.

While the bank still has to carry out the Banamex IPO, “we are the firm now that we want to be for going forward”, she added.

“With the divestitures done, and done actually faster than our original plan, we were able to then get our organisational structure and management model to match the strategy of the bank.”

In January, Citi announced plans to cut 20,000 jobs by the end of 2026, after posting a $1.8 billion loss in the fourth quarter of last year.

A simplified business model accounts for half of the planned job cuts while the other half will be the result of business efficiencies largely in operations and technology, over the next three years.

Citi, which reported a 27 per fall in its first-quarter income to $3.4 billion, said it is eliminating about 7,000 of the 20,000 announced positions that will generate $1.5 billion of run-rate expense saving.

Under the broader strategy, the New York-headquartered lender has shifted its focus on five key businesses: trading, banking, services, wealth management and US consumer offerings.

“We are not the bank we were, which was more of a universal bank, so that is excellent … and I'm glad it's over because it's been a lot of change for our people,” Ms Fraser said.

“Not just where we've simplified the management model, but we've also asked people to change a lot of jobs within the firm.”