Citibank, a global American multinational investment bank, said its local unit Citi Philippines has been through a lot of economic downcycles but is expected to pull through even as the country continues to face issues of COVID-19 cases and delaying recovery, according to its officials.
“We’re always optimistic about our opportunities wherever we might be,” according to Citi managing director and head of markets and securities services, Paul A. Favila, in an online briefing Wednesday. “We’ve been to a number of these cycles and what is certain is there is always a point where we start to exit this downcycle and that’s where we’re focused on.”
Favila said Citi, one of the oldest foreign banks in the country, is “doing quite well” and they are focusing on the eventual reversal of the downcycles. “We always treat things with cautious optimism but optimism just the same. There’s always another cycle after this,” he said.
This was Citi’s first media briefing after announcing in April this year that it is scaling back and withdrawing its retail and consumer banking business in the country and in 12 other places – besides the Philippines — in the world including in China, India, Malaysia, Australia, among others. The bank has since then been in transition.
“We’ve been through a number of crisis,” said Favila. “That is something that we are always anticipating, that there will always be disruption happening one way or another, economic or in this case, a global pandemic.”
Even after giving up its retail and consumer banking business, Citi has continued to offer digital solutions to its corporate customers and it has built what it called a multi-channel, cross-asset connectivity platform.
Citi’s outlook on the Philippine economy and monetary sector is generally stable, with steady interest rates that will hold for as long as the economy needs support in its recovery.
Favila said the Bangko Sentral ng Pilipinas (BSP) will have to “keep loose monetary policy for an extended period of time” unlike other countries in the region such as Korea which has started a tightening policy stance. The BSP’s key rate has been untouched at two percent, the lowest level on record, since November 2020.
“Growth is expected to be very uneven and the pandemic is hitting us in very different ways. In our case, we are right smack in the middle of another resurgence,” he said. But as far as vaccination drive is concerned, Favila said the government is “in step” with other nations in the region.
“I expect we will continue to see accommodative monetary policy and that as far as central bank is concerned, I think they’ve done a whole lot to help support the economy and eventual recovery,” he said.
Gunjan Kalra, managing director and head of corporate and sales solutions (Asia Pacific) said during the briefing that they expect the US Federal Reserve to signal, but not announce, tapering in the coming months. She expects one round of interest rate hike next year and two rate increases in 2023.
In terms of the direction of GDP growth, Favila said the economy has just started its gradual reopening – “I think it’s a bit too soon to try to project when we might actually start the recovery phase. It seems that there’s a fair amount of resilience that we are seeing in terms of the Philippine economy.”
On the global market side, Stuart Staley, Citi managing director and head of markets and securities services (Asia Pacific ex-Japan), said they expect to continue to see the refinancing of debt and as the conditions change, there are opportunities that are created and banks such as Citi could take advantage of. “Its an opportunity to adjust our models as we go,” he said.
Staley said the recent market-moving China Evergrande – which some market observers likened to the Lehman Brothers’ troubles in 2008 when they filed for bankruptcy – is not going to cause a contagion in the short run. “But, it does have the high potential to affect the economic growth rate within China and that will have a second order affect not just on the Philippines but other economies that are heavily linked through trading interactions in Asia,” he said.
Staley said Evergrande is driving risk-off sentiments across the region. Favila, in the meantime, said this incident is not causing any ripples in the local market, and that it has “very little impact” on the peso and equity market.
“The Philippines is always an internally driven economy, (it is) very much consumption-driven and I think that will be the focus as far as the Philippine economy is concerned,” said Favila.