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Influencers with Andy Serwer: Jane Fraser

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In this episode of Influencers, Andy is joined by Citi CEO, Jane Fraser as they discuss the future of digital currency, why she thinks Asia is the world’s ‘epicenter of wealth creation’, and what Citi’s clients are saying about current bottlenecks in the supply chain.

Video Transcript

ANDY SERWER: Jane Fraser is Citi's CEO. She joined the bank in 2004 in the corporate and investment banking division, and she's the first woman to be chief executive in the bank's history. Fraser manages what she calls the world's most global bank, serving millions of customers businesses and institutions across 160 countries. In this episode of "Influencers," I'm joined by the Citi CEO as we discuss the future of digital currency, why she thinks Asia is the world's epicenter of wealth creation, and what Citi's clients are saying about the current bottlenecks in the supply chain.

[MUSIC PLAYING]

Hello, everyone. I'm here with Jane Fraser, Citi CEO. Jane, so nice to see you.

JANE FRASER: Oh, wonderful to see you, Andy. Thank you so much for inviting me.

ANDY SERWER: Of course. So Citi just announced strong earnings with profits up about 48% year over year, driven in part by big returns in equity trading revenue and M&A, so much of a difference though during COVID when you're doing business, and there are some tailwinds that you have actually. And I'm wondering, how sustainable those numbers are as we're coming out of the pandemic?

JANE FRASER: Yeah, look, I've had the advantage as we come out of the pandemic of getting on the road a lot recently. I've been in all sorts of places Mexico, London, Germany, Kenya, all over, and getting a lot of color from the clients on the ground, because there's nothing like engaging with them as well as with our investors. And what I'm hearing is a lot of confidence from the clients, they have a lot of liquidity on their balance sheets, they get it they're feeling good about the-- the health of their financial health.

And therefore, they're-- they're using this liquidity to drive Capex, they're using it to drive M&A, they're using it to drive growth. Couple of geographies, we're seeing some deleveraging not surprisingly in China being one of them. But I think it's that together with the consumer savings, particularly in the states being so high that you have these engines of growth. But despite some common concerns that we're hearing around, you know, supply chains, and inflation, and labor markets, which I'm sure we'll touch on, but despite that I think these are going to be important engines.

So from our point of view, robust pipelines heading into the end of the year into next year. And also, you know, for us as a very global bank a lot of work on strengthening supply chains for our clients around the world and both strategically as well as tactically, and that's also quite an important growth driver for us. So I'm feeling cautiously optimistic. Andy.

ANDY SERWER: Nice to hear that, Jane. You touched on a number of things we want to get back to as, you're saying supply chain and labor shortages, and all that, you took over as CEO in February is that, right?

JANE FRASER: March the 1st, Yeah.

ANDY SERWER: March the 1st. Right, OK. And you've been busy, you've undertaken a strategic refresh. So what areas of the business do you see as offering growth opportunities? And what are you getting out of? And what's driving those assessments?

JANE FRASER: Yeah, look, I think it's any-- any new CEO you do take a fresh look at your strategy. And I think particularly relevant given how COVID has accelerated digitization in the industry, so competitive landscape looks different in the decade ahead, scale and scope, and speed has also increased greatly. So is that I-- how do we change our business mix of the bank to make sure we're as well positioned as possible, I have a very important returns gap with some of my peers that is a very high priority to narrow, but also how do we run the bank better.

So the types of areas we've been looking at we've done a very clinical review of the business, I think a number of different areas we're excited about, we are the world's most global bank, we move forward trillion dollars of volume daily, I mean, it's a mind boggling number. And it's in areas such as foreign exchange, cash management, trade really the heart of the global flows in the economy, I see that just growing, continuing to grow in scale and speed. So a lot of the strategy is looking at how do we make sure that we're modernizing the whole bank to be ready for that, that affects talent risk and control, that affects your tech platforms last mile. So quite a bit of a focus on-- on the strategy on the how.

In terms of areas, I'm excited about Asia, I have to say and will that one I know will go into deep dive in, and I'm sure, but there's a lot of wealth creation happening there, tremendous amount of innovation in the number of unicorns being created. So there are a number of waves to ride there, we're particularly excited in our commercial banking operations in our Wealth Management businesses, as well as in the way that we connect different markets in Asia together, and the regional flows as well as the flows around the world. So you a lot of a-- lot of areas to be excited there, I think it's true everywhere else around the world then those same areas. But I'd say, it's that global flows, wealth, commercial banking are sort of the big growth areas for us, as well as retaining our leadership positions in the other businesses that we're focused on.

ANDY SERWER: Well, let's drill down into Asia then a little bit.

JANE FRASER: Yeah.

ANDY SERWER: Not a homogeneous region at all.

JANE FRASER: No.

ANDY SERWER: And so I'm wondering, you know, sort of top down, what your strategy is say geographically, and in product be sort of view.

JANE FRASER: Well, I mean, I'd start off by saying we've taken a pretty hard look and very early on. And made the call actually to exit our consumer banking franchises in Asia. It's that-- that's a part of the business that I think is very locally driven. And that while we've had big strengths in that historically, I would rather focus our shareholders money in the capital into the areas I think we have a competitive advantage. So we're exiting our retail franchises in Asia.

And in monetizing that value, excess capital will go back to the shareholders. Then when I look at the-- the Asian markets themselves across the board, you're right, different geographies. You're seeing some differences. But I'd say it is the epicenter for wealth creation. We're seeing this in terms of a rapidly growing middle class.

Therefore, we're focused on wealth. We're seeing this in half of the world's unicorns have been created in Asia. So it's also driving our mid-market businesses as the-- almost like an elevator for clients in the mid-market. Many are born digital, rapidly go, become Asian players, not just their domestic players. And we're seeing the time frame from birth to IPO in Asia for most companies being six years, which is an astonishingly short period.

And then finally, what we are again seeing across the board is this digital acceleration. It's being powered by e-commerce. It's been powered by technology innovation. And so now, all of this activity that's occurring of transformation means, for us and I think for our peers, wealth being in this epicenter of that wealth creation. Being in the epicenter of digital and technology innovation is really critical.

And I give an example. I was sitting down with the finance minister of India this weekend who-- last weekend, sorry. Time flies here. As she was in town for the IMF. And we were talking about the fact that Citi serves 50% of the unicorns in India.

We serve about 30% of the multinational companies in India. And how incredibly vibrant those markets are, and how digital that has been come in the last few years. So I think these trends are going to be the same, no matter where you are. And we're also seeing the recovery from COVID starting to accelerate.

I was pretty encouraged to see ourselves. We're starting to bring people back into our sites again after the second surge of COVID in India. And we're seeing it beginning to see a stronger recovery thereafter, after a pretty brutal few months in many, many geographies in Asia from a COVID perspective. I'm bullish, as you can tell.

ANDY SERWER: I can tell.

[LAUGHS]

Let me follow up though and ask you about China, specifically. Jane, you set up a commercial banking desk in Singapore to help emerging Chinese companies expand across Southeast Asia, but I'm wondering, you know, sort of understanding, judging and then figuring out how to play China must be very complex, and I'm wondering what your thinking is?

JANE FRASER: Yes and no. We've been in China, I think it's almost just over 120 years. So we have seen China through many phases where on the ground there, and, you know, have-- have a long history in the country, so that does help. And we serve many of the multinational companies helping them do business on the ground and many investors doing business on the ground there. What I'd say about it, is that clearly it's-- it's undergoing material shifts as it has done and has taken some pretty impressive strategic shifts over the last decade, and you think of the pivot to more of a consumer oriented driver more self-sufficiency of their growth, as opposed to the dependency on export and infrastructure.

And, you know, that's obviously one that the government is pursuing quite aggressively right now, that does mean, slower growth, and I think there's some concern about overheating in China right now, there's a focus on deleveraging for sure. But as we look in the longer run, it's going to certainly be a major engine of growth for the world as it has been, but I think it's come off the boil for sure. But I think you know, bubbling away to too ferociously isn't great either, so Yeah, I mean, we look at it with some caution in the immediate term, but in the role China will play and in the world is only going to increase in its importance and one will all have to manage carefully.

ANDY SERWER: You know, that phrase you just said, Jane come off the boil, I picked up on that from the earnings call you use that I don't know, that's a Scottishism.

JANE FRASER: It's-- it's-- it's a love of cups of tea.

ANDY SERWER: Got it. And so means, things are slowing down a bit or there are some concerns a little bit of headwinds, and you just talked about China, but I want to ask you about some of the domestic and other global factors as well. We've talked about supply chain, we've talked about inflation, debt ceiling negotiations, what's-- what's concern you the most? And maybe-- maybe we could talk about inflation, because that concerns a lot of people.

JANE FRASER: Yeah, I mean, I think we've-- we've stopped hearing people seeing transition or transitory, because it's feeling a tad longer than that. However, if we look at the causes of it, and they are ones that the world economy will work through, I mean, we did have an extraordinary dislocation in COVID. And-- and I think pat on the back to the world economy about how incredibly it was responded to both, in terms of the regulators from the support given to the markets down to, you know, our clients around the world, and indeed our people. But it's going to take some time adjusting, and we don't go back to the way it was, we're going to a new normal as well. And I think the strength of the recovery in the first half of the year everywhere around the world, was better than anyone expected, but the result of that is demand was very, very strong, strong from consumers, strong from corporates.

And our supply chains, therefore had-- has had some pretty severe dislocations from logistics all the way through consumer hoarding, all the way through higher consumer demand to other dislocations in this-- in the both demand and supply of materials. This too shall pass. It's going to pass probably in 2022, and we're probably in for a bit of a brutal winter, particularly in the energy markets where there's also some challenges there, but it's not long term structural stuff that we won't adjust to.

And certainly more concern that it could become more sustainable, because inflation is sustained, and it is unquestionable, I think the word someone used the other day that we've certainly having episodic inflation unquestionably. The question is therefore, does this become something more sustained? We won't know until next year, I-- I don't think it will become a big issue, but it certainly is something that's going to be choppy for the next while, and it won't be helped if the US debt ceiling situation doesn't get resolved on a more timely basis before December.

ANDY SERWER: I want to ask you about employment, and specifically and workers and working specifically at Citi, two part question, Jane. One, back to work, how is that going? Two days a week, vaccines and all that, number one. And then number two, are you having a hard time simply hiring people?

JANE FRASER: Yeah, look, it-- it certainly depends all around the world, so every market is a little bit different, depending on vaccines, depending on what's happening in terms of health and the local geographies, so sort of one size doesn't fit all in the equation we're looking at. But what we are seeing is from the workforce people don't want to go back to where they were, there's a feeling of they've changed. I've changed. And I want things to be a little bit differently, and we've shown some more flexibility does indeed work.

We do want people back, we do think there is tremendous value in being together, it's important for apprenticeship. We can see it with our kids anyone who's been doing home schooling, it's the kids learn more in school than they do in the home environment, they're learning other things important things at home. But it's just easier, I think it's the same way for you know, in the work environment. We learn a lot from each other helps for coaching, it helps for collaboration, it helps others, but flexibility is also very important to our people.

And so for us, it's a balance of the two that we want to give folks come back together, but we're going to give you more flexibility than it was before. And I would say that-- that seems to be working, I know it worked for me when I was a working mother. I needed that type of flexibility myself, and I didn't feel that it needed to interfere with my effectiveness as a professional. So I think that's-- that's how we're looking at it, I would say that's been successful for us in being a magnet and some were attractive for people to work that said right now, the labor supply is incredibly tight.

And so when-- when we're looking at our-- we look at people who are working in an operations center, they've had-- haven't had to commute, they haven't had the cost of that, they don't necessarily want to come in every single day and they've got the setup for a call center right at home. And, you know, we can see whether they're being productive or not, or need to come in for more efficiency. So I think again by mid-next year, some of the supply-- some of the labor supply will have worked its way through, but it's a very, very tight market at the moment. And it is one topic we talk about when I jump on the phone with our CEO clients, which we do all the time we're no longer talking return to office we're talking tight supply chain, and I think it will be the first topic for a while longer.

ANDY SERWER: You retaining those employees.

JANE FRASER: Yes.

ANDY SERWER: First sustaining them then-- then after that trying to hire, shifting gears a little bit. Jane, I want to ask you about another huge topic, and that is crypto--

JANE FRASER: Yes.

ANDY SERWER: --decentralized finance. And I guess I want to, you know, as a CEO, if I can ask you the big strategic question. How do you view this nascent, incipient world that is obviously affecting your bank and your business, and how do you plan and move forward?

JANE FRASER: Topic we-- we spend a lot of time discussing with many of our partners and clients, as well. So I think you start off with the premise. It's clear that digital assets will be part of the financial services and financial markets, the future of them. We already see clients very active in the space. Real time payments are both, in the sense of their frictionless, they'll become more global, they'll become ubiquitous.

Real-time payments will be here in the near term, and digital currencies may be part of that future. We see benefits from the digital asset space, instant processing, fractionalization programmability, and transparency, you know, very geeky words for geek like me, I love them. But those are very tangible benefits that come from it. I would say we're proceeding thoughtfully and with appropriate caution here, why is that? There's still a lot of questions about how the space evolves around regulatory clarity, around some of the scalability, around resiliency, certainly around some transparency, and making sure that there are the appropriate guardrails in the system particularly for our retail clients.

We don't want them participating in areas that know they're not necessarily as well equipped to understand the risks of. So for me as a CEO, I'm working to connect our clients to wallets. Were enabling our businesses to extend up and our corporate clients to accept consumer payments.

We're building the infrastructure for retail-- real time payments, but we're doing so cautiously, because the space is moving so quickly. And not all the guardrails that you would like to see a yet in place. And, you know, as a banking CEO, I do believe guardrails are important and necessary for the safe-- safety and soundness of the financial system, and so I like them there for resiliency.

ANDY SERWER: That's provides a nice segue to my next question, which is the regulatory environment and the relationship of city to Washington and the banking sector writ large to Washington. What would you like to see out of Washington DC that would be most helpful, Jane?

JANE FRASER: I think it's what we're talking about, you know, we're seeing this world move unbundling from the old financial architecture, and that's from currencies all the way down to deposits, and it's moving to new digital architectures. They're largely born digital. So outside of trading and some of the more institutional spaces, there's a real disconnect from one architecture to the other, it's not a-- not an evolution. And therefore we've got to transfer the wisdom, the knowledge, how to make that system work well, and safely and soundly from one architecture to a new one.

And I think it's one in, which our regulators are clearly very focused on this Washington, is very focused around this from the central banks around the world are. And I think it's that we continue, a constructive and active dialogue, between public and private, between the fintech and the banking world to make sure that we have a system that will capture the benefits of these new technologies. But also one that will work in the way that's in-- in the best interest for everybody, and doesn't have recklessness in there. And so far a very constructive dialogue, I think we all need to be highly engaged, and listening to everybody on this front.

ANDY SERWER: A couple of questions about ESG, Jane. First of all, you guys announced a billion in strategic initiatives in the aftermath of the murder of George Floyd last year to help close the racial wealth gap, can you talk about that? Number one and then number two, you guys have committed to phase out financing for coal power by 2030, although not with oil and gas, so can you that's-- that's a lot of stuff there, but can you--

JANE FRASER: Yes.

ANDY SERWER: --one of those, please.

JANE FRASER: Yeah, quickly on the racial equity. So in the US, we announced 1.25 billion really to support the closing of the racial equity and wealth gap, we've done some important work that showed in our research departments that, you know, if that gap was closed, the US economy would be $5 trillion bigger, I mean, that's a benefit that lifts everybody up, this is a win-win for everyone of work on this. We've actually put a 3 year commitment in we're about a year and a half through, and we've almost completed it. So we will be re-upping the number before long, and it's focused on areas such as affordable housing, supporting Black entrepreneurs that haven't had the access to capital, working with our MDI and CDFI partners. So this is minority owned banks in accessing some of the communities that we don't have a presence in, and providing access to credit and-- and in ways where we're also partnering.

So just very important pieces that we've been working on that list-- lifts everyone up, I think similarly when we look at our commitments around climate, I know when I look at what we need to do. It's very clear that we need to help the economy, shift onto new technologies and onto greener technologies. That said, I am very mindful that we also have an energy policy that's important in the play here, and getting that balance of making sure that we shift onto, and help prove out new technologies. We develop them, we get the cost of these to come down, we've seen wind and solar come down dramatically over the last few years, you know, these are all very important dialogues that we're having with our clients.

So we don't want to jeopardize energy policy, particularly in emerging markets or the developed world, but at the same time, we want to help our client shift onto these new technologies and onto cleaner technologies, and help them responsibly retire the-- the other assets. So we separate out coal, from gas, from oil, and we may and we've made the commitment on coal, I've made the commitment for our firm of net zero by 2050. And we're working very actively on all the fronts on disclosures, on understanding climate risk, on understanding energy policy and the needs of the world, and looking at how we can make this shift happen in a responsible manner, but make it happen. It's not an easy balance, but we think it's an important one.

ANDY SERWER: On March 1 this year when you became CEO, you are the first woman who is the CEO of a major investment bank in the US, and is that something that's still informs you? Or that you consider? Or is that sort of in the rear view mirror at this point, Jane?

JANE FRASER: I think as-- as I'm sure investors would expect in me, I'm much more focused now on doing a good job in the day job, and being a good CEO, than thinking about being a female CEO, so it doesn't-- doesn't really affect the day to day. I'm certainly mindful, particularly when I speak to many of our, you know, male investors and-- and male clients, who are dads. That actually this was something that was important for daughters around the world, that's something I'd expect, the moms to talk about. But many of the dads have said, there's certainly a sense of responsibility there, but in a positive way.

And I know, it was obviously got a proud that moment, but I didn't think of it as much on the-- the gender front, it kind of came as a bit of a surprise how much was there. Does it affect how I am as a leader? I think there are advantages to being a female leader right now, in the sense of I'm probably much more comfortable leading in a different style. I almost feel that, if you-- some of my male colleagues they're almost more in an expectation around, how they'll do something whereas, I feel as if I have more liberty and freedoms around that.

And that's particularly leading with empathy right now, I think of empathy as a competitive advantage. Empathy is about listening and understanding another person's point of view, and incorporating it. I've grown up in the client business here, and I've found that to be a very valuable skill when working with clients, so you're not pushing my idea or product on the match the understanding what they want. I think it's the same particularly for our people, you know, what is it our-- our employees and our people are needing right now. So how do we get that balance right to be competitive in the talent market, I think is very helpful, and I think people are after a sense of purpose.

Again, a sense of identity of the bank that they belong to and they want to be in a bank with brains, but they also like the idea of a bank with-- with some soul and purpose about it as well, and we talk about that, but make no mistake. Empathy we believe delivers excellence and an edge, it's not just there because it's a nice to have, it's there because we do believe it provides us competitive advantage and it's-- it's very deliberate around that.

ANDY SERWER: And quick last question, Jane, what is it like to be back out on the road, meeting with customers and employees?

JANE FRASER: Oh, I think in a word energizing. Particularly, if you know, new in the CEO role. Zooms been great for being able to get to people, but there's nothing like building relationships in person. And actually wandering the floors, and talking to people seeing how they're doing and building that personal connectivity, so I have to say, it's certainly informing me. I'm listening hard, and, you know, I'm hearing a lot from our investors about what they're expecting from the bank, what they're expecting from me, and, you know, it's easier to have very frank conversations in person. And I'm-- I'm loving it. It's very, very helpful.

ANDY SERWER: Great. Well, I hope to see you in person. Someday soon, as well. Jane Fraser, Citi CEO. Thank you so much for your time.

JANE FRASER: Thank you, Andy for having me.