Citi (C) Aims China's Belt & Road Scheme To Improve Revenues

Following Beijing’s Belt & Road initiative, the Wall Street giant — Citigroup Inc. (NYSE:C) — aims to explore new opportunities in China, thereby boosting revenue growth, per Reuters. Notably, the initiative was announced in 2013 with the target of strengthening China’s global leadership through infrastructure development and improvising trade relations between Asia, Africa, Europe, and beyond.

“We’re seeing more and more multinational customers benefiting from Belt and Road, mostly through supplying into the Belt and Road projects, particularly companies in the industrial sector,” Christine Lam, Citigroup’s chief executive for China noted.

What Drives Citigroup?

Citigroup works globally. Particularly, China constitutes out of eight Asian markets, which records revenue more than $1 billion for Citigroup. The bank’s local unit recorded profits of $163 million in 2016, up 1% year over year.

Therefore, per Lam, Citigroup is likely to produce more revenue through the Belt and Road related activities. Mergers and acquisitions, cash management, trade finance and hedging can be some of the options for bolstering revenues.

Notably, Citigroup shares banking relations with more than 80% of Fortune 500 companies in China, providing services in 58 markets in the Belt and Road countries. Therefore, this New York-based lender is supporting cross-border activities to benefit from President Xi Jinping’s Belt and Road initiative.

Since government-owned policy and commercial lenders mostly finances Belt and Road opportunities with China Construction Bank Corp and Bank of China raising billion-dollar funds, Citigroup is also on the path of providing services to the Chinese state-owned enterprises and other multinationals. For such target, the bank is investing abroad, with nine China desks internationally, including Dubai, Nairobi and Kazakhstan.

Notably, in February, first time a U.S.-based bank was granted a license of a bond settlement agent in China’s interbank bond market. The license allowed Citigroup’s local unit to be competitive in the country’s $9-trillion bond market with Deutsche Bank AG (NYSE:DB) and BNP Paribas (PA:BNPP) SA (BNP.PA).

Other Global Banks With Same Moves

Among other global banks, HSBC Holdings plc (NYSE:C) , Standard Chartered PLC (LON:STAN.L) and Credit Suisse (SIX:CSGN) Group AG (NYSE:C) are also in the pipeline of increasing cross-border capital markets and cash management services to tap the Belt and Road opportunities in China.

Our Viewpoint

An improving economic backdrop and optimism surrounding the China market are anticipated to support bank’s financials. Moreover, increasing avenues of top-line growth will augment Citigroup’s bottom line, going forward.

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