The new head of Citigroup Inc.’s private bank said he believes it can continue to grow in Asia despite a regulatory scandal the private bank has faced in Japan.
“Asia is a massive wealth-creating market, and we have had some hazardous goings, but we think that individuals need a big partner to continue to develop economically,” said Damian M. Kozlowski, who was named chief executive officer of Citigroup Private Bank on Thursday. “Wealthy individuals need advice from a large institution.”
A spokeswoman for Citi said its private bank in Japan was separate from the company’s Asian private banking region.
Mr. Kozlowski, 40, succeeds Peter Scaturro who was among three senior executives fired in October after Japanese regulators revoked Citi’s private banking license in September over a series of lapses in internal controls and compliance.
Of the 18 to 20 countries in Asia, Mr. Kozlowski said, some, like India and China, have massive potential for Citi, which has shored up compliance reporting and management accountability since September.
“In Asia and Latin America, Citi continues to be a premium brand,” Mr. Kozlowski said. “There is not the same level or intensity of competition in Asia [as in the United States]. We have a wonderful reputation in both areas.”
Betsy Graseck, an analyst at Morgan Stanley who covers Citi, said the Japan scandal was specific and limited to Japan. She said she agrees that Citi can continue developing its Asia private banking business despite the Japan misstep.
“Every market is different, and these markets are really far away from each other,” she said. “I don’t think what happened in Tokyo will impact what someone is thinking in Singapore.”
Mr. Kozlowski, who has been president of the U.S. region in Citi’s private bank since 2002, said he hopes to use some techniques that have worked in the United States in order to expand globally.
For example, he said, he was successful in this country with an advice-based team approach to clients with more than $25 million of assets. This approach expanded North American revenues to $234 million at March 31 (including Mexico, a slower-growth market that was not part of Mr. Kozlowski’s responsibility).
Todd Thomson, who is Mr. Kozlowski’s direct boss as CEO of Citigroup Wealth Management, told an analyst day at UBS AG in April that the U.S. region had exceeded its peers’ performance.
“The private bank is not some channel where we can just force products at customers,” Mr. Kozlowski said. “This is not acceptable with wealthy clients. They want the right advice, not a product, to solve the problems that they have.”
He said he knows the U.S. model will not work everywhere but hopes some of its fundamentals can jump-start growth in Asia, Europe, and Latin America. “It is nice to say that we want to bring this model globally, and in a 50-year context that might work,” he said. “We want to use certain techniques that have worked here and find ways to adapt.”
He said he hopes organic means will be effective for the desired international expansion. The private bank would consider dealmaking but first must grow from within, he said.
“Deals only makes sense if you have a strong organic model,” he said. “If you don’t have a good strategic vision, deals won’t be helpful. You have to have a strong organic strategy first, but as the industry consolidates we could make a deal to gain scale.”
Mr. Kozlowski said he is confident the private bank can expand on the $221 billion of global client business, including loans and assets under management, it had at March 31, as well as its $122 million of net income.
