Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: We're very pleased, of course, to be here at the
Speaker 2: twentieth anniversary of Cities China Conference here in Shanghai, and
Speaker 2: we have none other than the chair and CEO, Jane Frasier.
Speaker 2: Thanks so much for having us.
Speaker 1: Well, we're delighted to have Bloomberg here. Thank you very
Speaker 1: much for joining our conference.
Speaker 2: So what do you hope to get out of this
Speaker 2: and when talking to all your guests and your clients
Speaker 2: and to understand a little bit more about the China market,
Speaker 2: which you know very well. But we're coming out of
Speaker 2: a bruising trade war. We're not even out of it
Speaker 2: yet right. Some say it's a truce, not necessarily a
Speaker 2: lasting piece. What has been your takeaway so far?
Speaker 1: I think what's interesting this time at this conference is
Speaker 1: that it's moved away from a China for China story
Speaker 1: and instead we have had huge interests and a large
Speaker 1: number of investors and companies coming to China to understand
Speaker 1: what is happening here, as well as the Chinese companies
Speaker 1: and investors that are looking much more externally now. So
Speaker 1: that really feels like a sea change here. That's pretty exciting.
Speaker 2: How do you serve your clients against the backdrop of
Speaker 2: two governments that are trying to de risk, if not decouple.
Speaker 1: I think the recent truth has brought some much needed
Speaker 1: and welcome stability here. We're in a position now for
Speaker 1: both sides that wanted to have a period now where
Speaker 1: we can just we can move ahead and have a
Speaker 1: more stable relationship between both of them. Is transactional, but
Speaker 1: it's in both both sides interests. We see our client
Speaker 1: base navigating this.
Speaker 2: Well, Yeah, what's your vision for the China as the
Speaker 2: China market as it folds into your overall restructuring plan
Speaker 2: as well? You're now chair and CEO, first time that
Speaker 2: those two rules have been joined in a couple of decades,
Speaker 2: clear mandate to carry out your vision going forward?
Speaker 3: What does that look like?
Speaker 2: When you did exit your consumer banking business here like
Speaker 2: you did in many markets around the world, you also
Speaker 2: sold your retail wealth management portfolio to HSBC. You got
Speaker 2: out of an investment bank JV with Orient Securities, I believe,
Speaker 2: and you have an outstanding license application for your wholly
Speaker 2: owned JD Insecurities.
Speaker 3: So City has.
Speaker 1: Been in China for one hundred and twenty four years.
Speaker 1: We have a landmark building here in Shanghai. And what
Speaker 1: we have done is focused our strategy and grow. We
Speaker 1: are following our international clients around the world.
Speaker 3: We're seeing them with.
Speaker 1: Renewed interest and focus in China as we talked about,
Speaker 1: and then we're seeing the Chinese companies innovating at pace
Speaker 1: and also looking at expanding internationally. So we've been growing
Speaker 1: rapidly here with a more focused strategy, and it is
Speaker 1: the power of clarity and renewed purpose in the firm.
Speaker 2: Now, before this interview started, you really countered what I
Speaker 2: said is you're pulling back a little bit from China.
Speaker 2: That's not at all. You're adding headcount. How Come what
Speaker 2: are your headcount numbers? When we get headlines that your
Speaker 2: IT department maybe thirty five hundred jobs are going to
Speaker 2: be moving elsewhere and this, and that you pulled back
Speaker 2: from retail three or four years ago.
Speaker 3: Yeah, I think you're getting the story wrong. Good.
Speaker 2: Yeah, that's why I serious.
Speaker 1: City is on the city is on the front foot.
Speaker 1: We are innovating, we are growing, We're helping support our clients.
Speaker 1: Our clients are both building resiliency and they are reinventing
Speaker 1: themselves with all the technological changes that is no different
Speaker 1: in China than it is in other parts of the world.
Speaker 1: So I know this is a firm with clarity, a purpose,
Speaker 1: with clarity of direction where we're headed, and we're really
Speaker 1: delivering strong progress. So I'm excited by the upside that
Speaker 1: we have. I'm excited about the progress we're making, and
Speaker 1: I see it here on the ground in China. If
Speaker 1: we think we move away from some of the just
Speaker 1: headwinds that we all know about on consumer spending and
Speaker 1: on the property market, you look behind.
Speaker 3: That here in China. It's a manufacturing powerhouse. What are
Speaker 3: we seeing?
Speaker 1: Fifty percent of all robotic companies in the world are
Speaker 1: here in China. China is writing the next chapter of
Speaker 1: its economy around advanced manufacturing, around innovation, as well as
Speaker 1: all Chinese companies expanding internationally. And we're both serving seventy
Speaker 1: percent of a fortune five hundred that are here in
Speaker 1: China as well as serving the Chinese companies locally tap
Speaker 1: into global marketing.
Speaker 2: So how does that equate to what the deal flow?
Speaker 2: You see, who's the head global banking who we talked
Speaker 2: to a couple of hours ago, extremely bullish on the
Speaker 2: amount of deal flows going into twenty twenty six, what
Speaker 2: kind of cross border with China do you see.
Speaker 1: Look, I think we're seeing new corridors opening up, and
Speaker 1: the scale of ambitions not just in China but in
Speaker 1: Asia are higher than we see really in many other
Speaker 1: parts of the world. So in these new corridors, we're
Speaker 1: seeing the Middle East connecting with Asia. For the GCC,
Speaker 1: you know, they were expecting Asia to be its largest
Speaker 1: trading partner by next year. That's an entirely new set
Speaker 1: of flows. In the last five years, Brazil's connection into
Speaker 1: Asia and into China again very robust their major partners.
Speaker 1: So you know, the world is changing rapidly. It's adding
Speaker 1: new corridors, it's adding new flows, it's adding new wealth
Speaker 1: and scale is the name of the game.
Speaker 2: What will be your strategy with wealth management? You got out,
Speaker 2: as I said, the retail fortune of your health management
Speaker 2: was sold to HSBC. But you're going to be on
Speaker 2: shore here, but you're going to do a lot of
Speaker 2: it from Hong Kong and Singapore.
Speaker 1: Rightw SO City is focused internationally on not on retail banking.
Speaker 1: We are focused on serving clients who have cross boorder needs.
Speaker 1: That is a very vibrant good segment of clients. Think
Speaker 1: of individuals that are driving the mid market, companies are
Speaker 1: growing internationally. We think of the world's billionaires and wealthy
Speaker 1: that need access to global markets, and then we obviously
Speaker 1: think of investors and corporations we're doing so there's a
Speaker 1: lot of engine of growth.
Speaker 3: It's going to be fifty percent of all of the
Speaker 3: new high.
Speaker 1: Network households created in the next three years will be
Speaker 1: created here in Asia. So our focus is on what
Speaker 1: is the wealth proposition for those as well as supporting
Speaker 1: the companies and the engines of growth behind them.
Speaker 2: Of hiring is going to be needed in this part
Speaker 2: of the world, not necessarily China, but the rest of Asia.
Speaker 2: At a time when we're also seeing Corporate America as
Speaker 2: they invest heavily into AI, they've had to pull back
Speaker 2: on hiring and jobs.
Speaker 3: Have been cut. It's a great question.
Speaker 1: I think AI is certainly changing a lot of what
Speaker 1: we're expecting we're going to need in the world going forward.
Speaker 1: So from city's point of view, for example, we see
Speaker 1: this as an opportunity to really train our talent. How
Speaker 1: do we empower our talent to use the AI tools
Speaker 1: so they can be smarter in front of clients. They
Speaker 1: can spend more time serving clients and coming up with
Speaker 1: solutions as opposed to the more chure elements of being
Speaker 1: a banker. We don't know how quickly it's going to change, Steve,
Speaker 1: so you'll be certainly a lot of shift in coding jobs.
Speaker 1: We've seen that already. Our productivity is up nine percent
Speaker 1: year over year for our coding teams.
Speaker 3: There's going to be new jobs created too.
Speaker 1: None of us quite know yet exactly how the timing
Speaker 1: will play out, and we know there's a lot of
Speaker 1: change ahead of that, but our approaches, we're going to
Speaker 1: invest in our talent. Our firm is growing and that
Speaker 1: should be able to support the needs going forward.
Speaker 2: You mentioned the Middle East. I think you just came
Speaker 2: back from Riard. You're col chair of the US Saudi
Speaker 2: Business Council. I believe this also very bullets on India,
Speaker 2: magnificent opportunity.
Speaker 3: There's biased might be a little bit.
Speaker 2: Biased maybe, but again what do you hope to get
Speaker 2: from those markets as it fits into your restructing plant
Speaker 2: and the vision that you just talked about.
Speaker 1: The growth plans that we have going forward. Because we
Speaker 1: are on the front foot, I cannot stress that enough
Speaker 1: and you can see it in ourselves. So all of
Speaker 1: our businesses we're taking share, we're growing very quickly and
Speaker 1: our return are improving. So as we're looking forward its growth.
Speaker 1: Let's take India. City is larger in India today. We
Speaker 1: are the largest foreign firm by revenues in India.
Speaker 3: When I look at Korea, we are aware.
Speaker 1: I was just that that's another market where we were
Speaker 1: the first foreign bank to open the doors in Korea
Speaker 1: and we have a very strong position there supporting multinationals
Speaker 1: and clients. So as I look around the world, it's
Speaker 1: becoming more focus on diversification.
Speaker 3: There is also a focus on reinvention.
Speaker 1: What we are doing is helping provide the strategic advice.
Speaker 1: We're helping provide the financing and structuring and arranging that,
Speaker 1: and we're also helping manage the supply chain reconfiguration. We're
Speaker 1: helping with the hedging and foreign exchange interest rates. Because
Speaker 1: volatility is a feature, it's not a bug of this system.
Speaker 2: Through your restructuring, you had to get rid of the
Speaker 2: retail side, and there's are there other areas you would
Speaker 2: like to divest.
Speaker 3: I know you have the wrong story. The city is
Speaker 3: about growing we're very we're very foot forward, very clear
Speaker 3: on our strategy, and we're moving onwards.
Speaker 2: I only ask because, again, the Russia situation is a
Speaker 2: little bit different, probably than your overall strategy. We just
Speaker 2: got a word that Vladimir Putin approved the sale to
Speaker 2: Renaissance Capital of your bank in Russia, probably something that
Speaker 2: you've been wanting to do for a while but was
Speaker 2: held back.
Speaker 1: We have been winding down, as many many companies have been,
Speaker 1: the franchise in Russia.
Speaker 3: We were waiting for the final approval to be able
Speaker 3: to sell.
Speaker 1: We've got a couple more to go to Renaissance, but
Speaker 1: it's a tiny it's a tiny business, so it's in
Speaker 1: the grand scheme of where city is, where we're investing,
Speaker 1: on what we're doing.
Speaker 3: It would be good to get that done.
Speaker 1: But it's not critical to the firm's strategy going forward.
Speaker 2: Let's talk about the outlook in the United States right
Speaker 2: now as we head into twenty twenty six. We saw
Speaker 2: the market reaction overnight simply we're seeing that the Fed's
Speaker 2: equation the bets for possible easing coming up and now
Speaker 2: fifty to fifty hours till below that because of the
Speaker 2: aspector of inflation. What is your heltlook for FED action
Speaker 2: going into the new year and the spectrum of inflation rising.
Speaker 1: Look, I don't think we're out of the woods yet,
Speaker 1: and there's a sensor that maybe another.
Speaker 3: Shoe to drop.
Speaker 1: It could be in tariff or in the labor market,
Speaker 1: could be in the asset prices that are quite high
Speaker 1: in the States. But all of that said, we're quite
Speaker 1: optimistic about twenty six. The challenge for the FED right
Speaker 1: now is with the government shutdown. You know, we all
Speaker 1: have a death of up to date data which we
Speaker 1: could do with. It's hard to make these calls of
Speaker 1: exactly what's going on whilst we're waiting for the information.
Speaker 1: But as we look further out into next year, I
Speaker 1: think the resiliency of the corporate balance sheets, the strength
Speaker 1: companies leaning in to innovation, investing in AI, you know,
Speaker 1: there is some I think the doomsdays will be proven wrong.
Speaker 2: We're a couple of months out now from when we
Speaker 2: had concerns rise about I think there was one tricolor
Speaker 2: of the subprime model lender. There were failures. There was
Speaker 2: concerns about non performing loans. What does your balance sheet
Speaker 2: look like as far as that and where is your
Speaker 2: worries live.
Speaker 1: You know, our balance sheet is pristine, but I think
Speaker 1: part of that is because it's very heavily our investment grade.
Speaker 1: On the corporate side, we're over eighty percent investment great globally,
Speaker 1: and when we look at the consumer side, it's about
Speaker 1: eighty six percent prime. So you tend to you know,
Speaker 1: we tend to see the most resilient, healthiest parts.
Speaker 3: Of the economy on the balance sheet.
Speaker 1: All of that said, we haven't seen a thing that
Speaker 1: is concerning us. The consumer in the States is being
Speaker 1: fiscally responsible. Companies have been building up some more cash,
Speaker 1: either for a rainy day if it proves necessary, but
Speaker 1: most of them for investment, and they're you know, they're acting.
Speaker 3: From a position of strength.
Speaker 1: We'll keep an eye on the labor market, will keep
Speaker 1: an eye on some of the areas of mid tier
Speaker 1: players in private credit and the like. But as far
Speaker 1: as we're concerned that second third order effects the banks,
Speaker 1: the bank's not seeing anything that we're worried about.
Speaker 2: Are you concerned by what some say maybe bubble forming
Speaker 2: an AI? We talked about the advantages of AI, but
Speaker 2: how much of a bubble are overheating.
Speaker 1: I'm not sure if we're just in with a lot
Speaker 1: of our tech clients and the West Coast. I don't
Speaker 1: think anyone was ready to say that it's a full
Speaker 1: on a high bubble, but one is. No one is
Speaker 1: saying that there are some real pockets of let's call
Speaker 1: it the British understatement, frothiness in the market. It's more
Speaker 1: around the edges. What I found interesting is we can
Speaker 1: see a lot of the demand for the infrastructure build
Speaker 1: that's going in AI and the energy for the next
Speaker 1: couple of years. You know, where you saw some opinions
Speaker 1: diverge was in the three to five year period, could
Speaker 1: be in danger of overbuilding, But no one's feeling that
Speaker 1: for the big investments that are going on at the
Speaker 1: moment for the next couple of years. So I think
Speaker 1: on that one, certainly some pockets of frothiness there on
Speaker 1: the valuations, but the core infrastructure investments are important, and
Speaker 1: as we're seeing in our own bank, and I think
Speaker 1: many companies are, we'll start getting some of the productivity
Speaker 1: benefits coming through. But the scale, the scale and the
Speaker 1: pace of investment is unprecedented, that.
Speaker 3: Is for sure.
Speaker 2: Jane Frazer, thanks so much.
Speaker 3: Thank you.
Speaker 2: Hope you don't mind me playing the devil's advocate. I
Speaker 2: have the story straight now. Thanks. Thanks, thank you.
Speaker 3: Very much for having us here. Thank you CHININGA conference.
Speaker 2: The twentieth anniversary of that conference here in Shanghai,