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Citigroup Targets Indonesia Investment Banking After Crackdown

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Citigroup Targets Indonesia Investment Banking
Indonesia’s central bank in May barred Citigroup from issuing new credit cards for two years and from adding wealth management clients for 12 months after a local employee allegedly stole money from customers and a credit-card client died at a branch. Photographer: Ed Wray/Bloomberg

Aug. 29 (Bloomberg) -- Citigroup Inc., stung by a crackdown on its wealth management unit in Indonesia, expects corporate and investment banking to account for a larger share of revenue in the country as companies buoyed by economic growth raise capital and make acquisitions.

Corporate and investment banking may account for as much as 30 percent of Citigroup’s revenue in Indonesia within five years, up from 20 percent now, said Tigor Siahaan, the bank’s chief country officer, in an interview in Jakarta. New York-based Citigroup posted revenue of 5.9 trillion rupiah ($689 million) in Indonesia last year.

Indonesia’s central bank in May barred Citigroup from issuing new credit cards for two years and from adding wealth management clients for 12 months after a local employee allegedly stole money from customers and a credit-card client died at a branch. Even so, the government last week picked Citigroup to help sell as much as $1 billion of Islamic bonds, said a person familiar with the matter.

“The setbacks from a few months ago have not really impacted our client relationships,” Siahaan said. “Over the past few months, we’ve been winning new mandates.”

Siahaan, who replaced Shariq Mukhtar in June after the central bank ban, said Citigroup plans to hire three more executives for its 15-person global banking team in Indonesia in the coming year. Citigroup aims to be among the top three advisers on stock and bond offerings and mergers in the country within 18 months, he said.

Underwriter Rankings

Citigroup is fifth in arranging stock and rights offerings in Indonesia so far in 2011, up from 18th position last year, data compiled by Bloomberg show. The bank ranks sixth in advising on mergers and acquisitions involving Indonesian companies, the data show. Citigroup didn’t feature on the M&A league table in the country last year.

The lender’s position in arranging international bond sales in Indonesia slipped to fourth this year from third in 2010, according to Bloomberg data.

Citigroup was among banks that helped arrange rights offers for PT Bank Danamon Indonesia and PT Bank Mandiri this year. The bank also helped sell $1.5 billion of global bonds for PT Pertamina, the country’s state oil and gas company.

Siahaan said Citigroup is also focusing on expanding in other areas of the retail business, such as loans. Citigroup employed almost 6,000 people in Indonesia at the end of last year, according to its latest annual report.

Grow With Caution

“We’re stepping on the gas pedal but I don’t want to do this over-aggressively,” he said about the corporate and investment banking operations in Indonesia. “I want to do it in a balanced way, with the right customers, right sectors, right amount of products, right amount of credit exposure.”

Citigroup Chief Executive Officer Vikram Pandit has focused on developing economies, which are growing on average at three times the pace of Western nations, according to the International Monetary Fund. Indonesia is the world’s fourth-biggest country, with a population of 240 million and an economy that’s expected to expand as much as 6.8 percent this year.

“In the next five to 10 years, this is the place to be,” said Siahaan. “We’re seeing a lot of the companies starting to grow bigger. Not only will they need bank facilities, they’ll need equities, debt, advisory.”

To contact the reporter on this story: Joyce Koh in Singapore at jkoh38@bloomberg.net

To contact the editor responsible for this story: Philip Lagerkranser at lagerkranser@bloomberg.net

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