Mumbai Citibank’s Treasury and Trade Solutions (TTS) business, which includes payments, working capital solutions and liquidity management, is the key to the New York-headquartered bank. In India, it accounts for almost half of all unicorn startups among its clients and sees significant opportunities in the fintech sector.
In an interview, Shahmir Khaliq, global head of TTS division of Citibank, said that many customers are interested in India’s production-linked incentive (PLI) scheme, especially semiconductor and pharmaceutical companies. Edited excerpt:
What type of technology budget is the bank planning to allocate?
Globally, we have significantly increased our technology and capital expenditure. Many of our technologists are based in India. Our annual technology budget this year is approximately $1 billion for TTS, including improvements to our existing payment pipes, building out our instant payments infrastructure around the world, and our APIs (application programming interfaces) and our front-end client connectivity. investing is involved. We are also a good partner in helping FinTech grow its business globally. They have incredibly portable businesses, given that their digital model is scalable across markets.
Startup funding seems to have hit a roadblock. When do you expect to see an improvement in the funding environment?
Some firms looking to raise incremental capital will defer that decision for a while to see if they can get a little more certainty. Overall, what we are seeing is a slight slowdown in market activity as markets adjust to a higher rate environment and there is a possibility of a bearish move at some point. While valuations may be low and new fundraising may be delayed, this may not mean that funding is not available; It simply means that you are getting a different evaluation.
Since you rely on transactions, what do you do to protect your business from uncertainties like the Russia-Ukraine war and the lockdown in China?
We operate in 95 countries, and the TTS business is a very diverse and global business. There is very little concentration in our TTS business around a particular country or region. If we have a challenge in one country, we see a similar boom in many other countries. As rates rise, as we are in the deposit taking business, this positively affects our deposit spread. We are able to do more business with more customers around the world- North America, Latin America, Asia Pacific, and Europe, Middle East and Africa. This allows us to offset some of the negative macro effects.
Are global companies interested in setting up manufacturing facilities in India?
The scheme was announced in about 15 sectors, but the electronic and mobile manufacturing PLI scheme was announced two to three years ago. We have seen maximum customer activity for semiconductors.
Another area we are seeing interest in is pharmaceuticals as larger companies are adding capacity and exploring the benefits offered under the PLI scheme. We also see interest in the retail and telecom sectors. Some plans have just been announced, so it will take two or three years to build up to full capacity. But Semiconductor is a good example of how this plan has worked well for customers.
Are you following the mid-market segment?
In our business, we have an overall 10% wallet share for large clients globally. But we have a small wallet share of 0.5% on total commercial banking wallets (small and medium companies), which according to Coalition Greenwich data was around $175 billion in 2021. Of that, we estimate addressable wallets to be $60-75 billion. Our aspiration is that this 0.5% share is going to grow at least 50 basis points over three or four years, which translates to about $500 million. We are targeting only $60-75 billion addressable wallets globally. Each country depending on the size of the market will help contribute to that aspiration. The commercial banking segment in India has great potential, and we already bank 40% of unicorns here. These clients are rapidly becoming global and will require the same services that large institutional clients do, and we want to take advantage of this opportunity.
What about your presence in Russia?
Most of our large corporate clients are local subsidiaries of multinational corporations headquartered outside Russia, primarily in the US and Europe. As part of our strategy refresh in 2021, we announced our intention to exit our consumer business in Russia.