Citigroup Global Wealth Management

Maximizing Performance in a Competitive Market

Company

LOGO

BCG LOGO

Company

Agenda

 Objective  Overall Strategy  Formulating approach for each geographical region  Deploying Smith Barney  Conclusion

Consultant: Wendy

BCG LOGO

Company

Citigroup’s Objective

Understand Utilizing Build and Achieve Appropriate Growth the Resources environment

Consultant: Wendy

BCG LOGO

Company

Strategy of Global Wealth Management

Affluen t

CPB

HN W
Smith Barney

Consultant: Wendy

BCG LOGO

Company

Targeted Markets

SOUTH KOREA

CHINA INDIA
Consultant: Wendy

BCG LOGO

Company

Approach into China

Joint Ventures Acquire Stakes in Local Banks

Consultant: Wendy

BCG LOGO

Company

Action Plan
2006/2007 2009

Increase investment in local bank ownership of banks Acquire Intensify Offshore Pri 2005

Liberalization 2006

Consultant: Wendy

BCG LOGO

Company

Regulatory Framework
Undeveloped Derivative Market

Undeveloped Legislative Framework

Highly Regulated Environment

Assets Locked in Country

Restricted Foreign Investment

Consultant: Wendy

Back

BCG LOGO

Company

High Net Worth Individuals
Demands:  Good service and intimate relationship  New and innovative products  Balance between returns and risk  Transparency and higher disclosure

Characteristics:  Risk adverse  At initial stage of wealth accumulation  Not receptive to westernized concepts of wealth management

Consultant: Wendy

Back

BCG LOGO
Competition From/Among Local Banks

Company

Liberalization in 2006

Private Bank Sector

Foreign Banks Entry through Acquisition

Consultant: Wendy

Back

BCG LOGO

Company

Citigroup’s Positioning

 CPB cannot enter at the moment  Need to establish presence in the China market  Balance between gaining foothold and losing valuable knowledge and expertise to local firm
Consultant: Wendy
Map

BCG LOGO

Company

Approach into Korea

Market CitiGroup Private Bank Products through selected branches

Tap on Smith Barney’s expertise to offer innovative products

Consultant: Alvin

BCG LOGO
Competition From/Among Local Banks

Company

Low Interest Rate

Private Bank Sector

Customer Preferences

Regulatory Framework Consultant: Alvin

BCG LOGO
Tax Laws

Company

Highly Regulated Environment
Intense scrutiny of Private Banking Sector

Liberalization of Domestic market

Back Consultant: Alvin

BCG LOGO

Company

High Net Worth Individuals
Characteristics:  Professionals – entry level private banking clients  More knowledgeable and sophisticated investors

Demands:  High-yield products

Consultant: Alvin

BCG LOGO
Market Citigroup Private Bank & Smith Barney Products

Company

Action Plan
Identify & acquire targets to consolidate Intensify Offshore Private Banking

2005

2006

2008

Consultant: Alvin

Map

BCG LOGO

Company

Approach into India

Organic Growth

Develop human capital

Consultant: Alvin

BCG LOGO
Competition From/Among Local Banks

Company

Customer Preferences

Private Bank Sector

Foreign Banks Entrance into Indian Market

Regulatory Framework Consultant: Alvin

BCG LOGO
Regulatory Framework

Company

RBI Policy Paper •Phase 1(2005) •Phase 2 (2009) Non-Bank Financial Company (NBFC)

Consultant: Alvin Back

BCG LOGO

Company

Demographics

 Indian consumers tend to stick with their bank

 Number of High Net Worth Individuals (HNWI) in India grew at 14.6% twice that of the world's growth of 7.3% in 2004

Consultant: Alvin

BCG LOGO
Grow business organically

Company

Action Plan
Acquire NBFC/ Develop Joint Venture

Embark on acquisitions

2005

2006

Training Programme

2009

Consultant: Alvin

Offshore Banking

Company

LOGO
Consultant: Alvin

BCG LOGO

Company

Offshore Banking Strategy
Singapore India

South Korea

China Hong Kong

Consultant: Alvin

BCG LOGO

Company

Offshore Banking Hubs
Singapore Hong Kong
• Robust Regulatory Conditions • Vibrant Capital Markets • Strong Banking Secrecy Laws • Well-trained workforce

• Political Stability

Consultant: Alvin

BCG LOGO

Company

Strategy Overview
Customer

Citigroup Global Corporate & Investment Bank

Citigroup Private Bank

Smith Barney Private Client Consultant: Alvin

BCG LOGO

Company

Asia Potential

Consultant: Zehan

BCG LOGO
Client Band
Ultra high net worth Very high net worth High net worth

Company

CPB and Smith Barney
Net Worth
>$50 million

Citigroup Private Smith Barney Bank

× × × ×
Consultant: Zehan

$5 million to $50 million $500,000 - $5 million $100,000 $500,000

Entry-level high net worth

BCG LOGO

Company

Growth Potential in Asia

Distribution of HNW I
3 millions 2.5 2 1.5 2002 2003 Ye ar A sia-Pacif ic Europe North A merica 2004 1.9 2.5 2.2 2.1 2.5 2.5 2.3

2.6 2.7

Consultant: Zehan

BCG LOGO

Company

Growth Potential in Asia
Total Wealth of HNWI by Region
14.0

$ Trillions

12.0 10.0 8.0 6.0 2004 2005F 2006F 2007F 2008F 2009F Year As ia-Pacific Europe North Am erica

Consultant: Zehan

BCG LOGO

Company

Competitive Situation
M arket Share in Asia

13.51% 13.51%

27.03%

18.92%

27.03%

Citigroup

UBS

HSBC

JP Morgan Credit Suis s e

Consultant: Zehan

Smith Barney Potential Company

LOGO

CHINA

Consultant: Zehan

BCG LOGO

Company

Market Overview - China
Domestic Banks Internal Environment

Foreign Banks

China

Regulations

Consultant: Zehan

BCG LOGO
1

Company

Regulations
Restrictions in Geographic locations

2 Restrictions in Services

3 Restriction in direct investments
Consultant: Zehan

BCG LOGO
Competitors

Company

Market Conditions

Domestic banks – Big Four Foreign Banks – Fast Movers Labour  Education level  Wage rates

Customers
45% Tax rate Growth trends of sophisticated investors Restrictions on product offerings

Consultant: Zehan

Smith Barney Potential Company

LOGO

South Korea

Consultant: Heng Liong

BCG LOGO

Company

South Korea
Other considerations

Factors increasing share of pie South Korea

Factors decreasing Share of pie

Consultant: Heng Liong

BCG LOGO

Company

South Korea
• Demand
• Driven by Affluence • Preference for wide range, sophisticated product offerings • Up to 40% income tax • Record low interest rates

Factors increasing share of pie

Consultant: Heng Liong

BCG LOGO

Company

South Korea

• Intensive Rivalry among foreign banks • Labour • Union culture • Workforce not yet global (mono-linguistic) • Skilled labour lacking • Average wage is very high, >$7,000 per month Factors decreasing Share of pie

Consultant: Heng Liong

BCG LOGO

Company

South Korea
Other considerations

• Compliance with heightened regulation

Consultant: Heng Liong

Company Smith Barney Potential

LOGO

India

Company

LOGO WTO

requirements

ib L

liz ra e

on ti a

Consultant: Heng Liong

BCG LOGO
Restricted Offshore Banking

Company

Entry of foreign banks
Limited direct foreign participation in private banking

Liberalization according to WTO requirements
Consultant: Heng Liong

Company Factors Capturing Size of Pie LOGO (+)

Labor Cost Savings

Demand

Consultant: Heng Liong

BCG LOGO

Company

Factors Capturing Size of Pie (+) Demand

• private client business is relatively new to India compared to the more popular retail banking • Tax rates up to 30% • Increasing Affluence

Consultant: Heng Liong

BCG LOGO

Company

Factors Capturing Size of Pie (+)
• according to a study done by DT, Foreign banks such as Bank of America are predicted to outsource two million jobs from the West to India by 2008 due to labour cost savings of up to 40%

Labor Cost Savings

Company Factors Limiting Size of LOGO Pie (-)

Regulations

Intensity of Rivalry

Consultant: Heng Liong

BCG LOGO

Company

Factors Limiting Size of Pie (-)
• Foreign banks face the constraint of limited number of branches • Deployment Concerns • Workers’ productivity • Leverage on Existing Infrastructure
Consultant: Heng Liong

Regulation s

Company

LOGO

Deployment

BCG LOGO

Company

Factors Limiting Size of Pie (-) Intensity of Rivalry

• Before 2009, already have a number of foreign banks in India. i.e. HSBC, JPMorgan. • by 2009, one of the world’s best private bank UBS

Consultant: Heng Liong

BCG LOGO

Company

Conclusion
Deregulation

Innovation

Private Wealth Sector

Competition

iti C

up o gr

Consultant: Wendy

BCG LOGO

Company

Q & A Session

BCG LOGO

Company

Index

WTO  Kyoto Protocol Market Insights  China  India  South Korea

Educational Levels

BCG LOGO

Company

South Korea Education Level

Education Level in South Korea in 2004

22%

13% 12% Primary Middle School High School College University 43%

10%

BCG LOGO

Company

BCG LOGO

Company

BCG LOGO

Company

BCG LOGO

Company

Growth of targeted markets

GDP Growth
10.00% 8.00% 6.00% 4.00% 2.00% 0.00% China South Korea India 4.60% 9.10% 7% GDP

Company

LOGO