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Banking & Finance

US business needs to step up as Fed steps out: Citi CEO

Bank chief talks tax reform, exit from Japan's tough retail banking market

The U.S. needs more business engagement to boost economic growth, Citigroup CEO Michael Corbat says.

NEW YORK -- Corporate tax reform in the U.S. holds the promise of encouraging businesses to invest and hire more, providing the Federal Reserve greater leeway to shrink its balance sheet, Citigroup CEO Michael Corbat told The Nikkei in an interview in which he also discussed Asia's two biggest economies.

Excerpts from the interview follow.

Q: Do you agree that we're seeing a synchronized global economic expansion?

A: When you look at the world today, you've got to look pretty hard to find countries in recession out there. Growth's not maybe where we'd all like it to be, but we've got Brazil out of recession. Russia's come out of recession, etc.

And so you're hoping that the growth that's in there, and some of the confidence that's back in these economies, has the ability to step in as potentially central banks step out. That's why, here in the U.S., importance [is] being placed on, in particular, corporate tax reform. Because if you look at the economy, the consumer is performing pretty well, but we really need business engagement -- business engagement around investment, around capital expenditure, around hiring, around all those things.

Q: Citi is going to have a board meeting in Japan. What made you decide to do that?

A: Well, Japan is an important place for us. [On] October 8, we will be celebrating our 115th year in Japan.

As you know, a few years ago we made the decision to exit our consumer business in Japan, but we were very clear [about] our dedication and commitment to Japan in terms of our institutional business. We've been to London and we've been to Hong Kong and we've been to many of our hubs, and it was the right time to take the board to Japan.

Q: How do you view Japanese corporate activity?

A: Japanese companies ... they're smart, they embrace technology, they're acquisitive, and they know that if they are going to grow, their focus just can't be on Japan. It's got to be elsewhere in the world. And we think we're a great partner for Japanese companies as they go around the world, because we operate in most of those places.

Q: Are you satisfied with the decision to sell the consumer business in Japan?

A: Yes. For us, it goes back to this concept ... of scale, and do you really have the scale to compete. The Japanese banks are well run, they're terrific competitors. As we know, the environment there around traditional consumer banking is a challenging space, because you've got ... the combination of low interest rates, low loan growth [and] an aging population. And so what is the advantage that Citi can have against some very good competitors? It's very difficult to organically build that and grow that, and it's not realistic to think that we'd come in and buy anything of any real size.

Q: Some people are still concerned about a bubble in China. Will the Chinese economy keep its momentum for the time being?

A: We've all tried to keep a watchful eye and had a concern around the prospects of a hard landing in China. I actually think, given the macroeconomic environment that we've been in, China has done a very good job of transitioning their economy from one of being export-driven, investment-led, competing on a cost-of-labor advantage, to one today that is much more domestically focused, consumer driven than it was, [with] a big shift toward growth in the services space.

There's a lot more work to do, but so far I think we've got to give China credit for how well they've managed it to date.

Interview by Akira Yamashita, Nikkei staff writer

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