Citi taking cautious account of global events like Brexit, Trump presidency

Citi’s array of expert commentators say the banking industry faces a set of risk factors that will present a formidable challenge over the next few years.

Citi is exactly the kind of institution that might be expected to rethink its big presence in the City of London once the UK is out of the EU. Peter Macdiarmid / Getty Images

LONDON// The annual Citibank summit in London is an occasion for ­serious reflection on the big issues facing the world of geo-finance, and last week's event lived up to the billing.

The succinct message that came across was this: the American banking giant is in good shape; but it needs to be, in the face of a growing number of challenges in global economics and ­politics that are making the business world an increasingly risky and unpredict­able place.

Citi, since having been on the verge of collapse in the global financial crisis and having survived thanks only to life-saving capital injections by the federal government, has recovered to a position of strength in its global business.

It has slimmed down both in balance sheet and ­geographical spread, but still offers a wider range of global services in corporate, investment and retail ­banking, trade finance and wealth and asset management than any other single international bank.

It is well capitalised on all the key indicators and came successfully through the recent Federal Reserve stress tests. So applause all round for that.

But on the evidence as presented by Citi’s array of expert commentators, the banking industry faces a set of risk factors that will present a formidable challenge over the next few years.

The dominant themes of the summit were not unexpected: Brexit, the Trump presidency, the associated risk of authoritarian populism in Europe and elsewhere, and the grave condition of world trade. On all fronts, the future is uncertain.

On Brexit, Citi is exactly the kind of institution that might be expected to rethink its big presence in the City of London once the UK is out of the EU. It is considering its options but is fortunate in the “serendipitous” choice of Dublin as its European HQ earlier this year. Ireland could be a clear winner once the Brexit dust settles at Citi.

The wider European picture, however, is gloomy. “The real risk is further unravelling of the EU,” said the economics guru Willem Buiter, echoed by risk expert Tina Fordham’s rhetorical “how long can the centre hold?”

Jim Cowles, the chief executive of Citi’s business in Europe, the Middle East and Africa, was asked about the outlook in the scenarios of a “hard” and “soft” Trump presidency, and whether the president-elect would stick to some of the more extreme positions of the campaign trail. He thought there were economic positives in the fiscal stimulus Mr Trump has promised, in infrastructure and in health care, but he also warned: “We believe in globalisation”, in clear contrast to Mr Trump’s ­antitrade tirades.

The dangers were clearly spelt out by David Lubin, Citi’s emerging markets economist, who spoke of the “collapse” of global trade over the past five years, unprecedented since the end of the Second World War. His gloomy prognosis had a serious message for the trade-dependent Arabian Gulf hubs.

And not just for this region. The decline in emerging market trade meant the end of the growth model that the world economy relied on for decades.

“There is lots to worry about,” Mr Lubin concluded.

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