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Speaker 1: Bloomberg Audio Studios Podcasts Radio News Yes.
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Speaker 2: Our guest here is the host of this China City Conference, of course, is Jane Frazier, chair and CEO. Thanks so much, and good to see you. It's been a year.
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Speaker 1: It's wonderful to be here. I have been in China three times in.
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Speaker 3: The last six months, so I think that conveys best my enthusiasm for the opportunities we see here.
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Speaker 2: Including that big May summit between Xi and Trump. We'll get to some of the geopolitics in just a minute. We're also, what David alluded to, is that security's wholly-owned securities business that's been finally approved after about a five-year wait. Since you really became chair and CEO, you've been pushing for that. Congratulations on that. But I really want to start with what was your key message to the 1,500 people that are gathered here?
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Speaker 1: What's top of mind?
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Speaker 3: My key message is one of the greatest strategic opportunities in financial services is China.
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Speaker 1: And I think we're particularly.
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Speaker 3: Excited getting our license because I'm very grateful to the regulators here for giving that to us.
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Speaker 1: Because we see a huge opportunity here.
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Speaker 3: If I look at it from a couple of different dimensions, one of them, Citi serves 70% of the global Fortune 500 here in China. Incredibly active market for them. Similarly, and what's different we've seen over the last three years, is how many of the Chinese companies are expanding globally.
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Speaker 1: And I'm seeing them everywhere.
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Speaker 3: We're seeing it in Latin America, Central Asia, traditional spaces like the States and Europe, and obviously all over Asia. But I was walking around the floors of our Shanghai office yesterday doing a floor walk with our different teams. The growth is so tangible. There was just palpable excitement from the teams around what they're seeing in foreign exchange, what we're seeing in cash management, what they're seeing in trade, what they're seeing in investment banking, what they're seeing in wealth creation. So I think some of this is underappreciated outside China of exactly what is happening here.
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Speaker 2: Do you feel your patience has paid off in China? We've been seeing a number of the big Wall Street banks. I think I know the answer to that one. A number of the Wall Street banks are finally starting to see things turn around here in the China market, getting some tractions, as illustrated by the regulatory approval of the securities venture. So again, I go back to that first question about patience in this market is rewarded, would you say?
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Speaker 1: Well, I think we're probably a little different.
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Speaker 3: The city is 125 years in China and it has been a it's always been a successful and important market for us. What we have seen is on the onshore side, it's.
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Speaker 1: Needed patience because a.
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Speaker 3: Deep capital market and the breadth and depth and the regulatory rigor and other elements don't happen overnight. It just takes time to mature and develop. We've been seeing that. Obviously, you've got the world in transition. So you've got some of the industries here which are explosive in the growth.
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Speaker 1: Let's call them the new economy.
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Speaker 2: At the forefront of what's driving this CapEx explosion.
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Speaker 3: At the same time, you've got a transition happening in some of the consumer's market and obviously in the property market here. And so I think those two different elements.
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Speaker 3: Are working together, but we're now really seeing that new economy dimension get far more of a toehold now.
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Speaker 2: Yeah, so there are several speeds to this economy. You talked about consumption really still lagging right now, but tech is still going strong. You're seeing some rhetoric from the Beijing authorities as well about trying to damp down the hype a little bit. We already know, of course, about the dialogue in the United States about the pace of build-out and the risks associated with the the capex, and we've seen the repricing of the AI trade, definitely. Are you seeing that in China as well?
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Speaker 3: Look, there's an enthusiasm for AI here, which, as we saw in the US election, that there's been less of a strong positive sentiment in the States as there is in China. And I think part of what you're seeing in China is this is the manufacturing.
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Speaker 1: Engine of the world.
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Speaker 3: It should be no surprise, particularly after all the investments have been made in energy, to then see robotics, advanced engineering, as well as the green tech and now also fintech taking off and having multiple.
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Speaker 1: Legs and dimensions to it, AI enabled.
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Speaker 3: And so it's quite complementary in many ways to what we see in the US in terms of there is more service frontier model software prowess.
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Speaker 1: There are quite complementary skills in AI.
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Speaker 3: But no, there are some there are certainly differences here and a more positive sentiment towards it.
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Speaker 2: How do you read how the markets responded last week? Obviously, there was a lot of concern about the CapEx build-out. There's other concerns about the midterm elections, whether Washington's going to be a little bit more bearish, if you will, on AI and hyperscalers build-out. What does it say about we had a bit of a recovery overnight as well? How long will this correction and repricing last.
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Speaker 1: Would you say?
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Speaker 3: I think their reaction last week was unsurprising, but it was a tad overdone.
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Speaker 1: Because in terms of AI, the genie's out of the bottle. This thing is real.
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Speaker 3: Just look at the conference here. We had the same
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in our conference last week in Pebble Beach. You can just see... The need for compute is not going away. This is a multi-year AI infra build. Not everyone will be a winner in that dimension. But last week's reaction was probably against a perfectly priced market with a lot of hedge funds taking money off the table. So if the genie is not out of the bottle, where is the angst?
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Speaker 1: The angst, I think, is coming with pace. the pace of which.
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Speaker 3: This is moving, it's really transforming industries incredibly quickly. But when you have innovation at that speed, you need to have risk management at that speed. You need to be mindful as you're building out the infra about the impact on local communities. And I don't think the industry is deaf to what happened in the U.S. election and the messages that were being sent. There's got to be a more thoughtful response. And I suspect we'll see that in how they're approaching data centers.
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Speaker 2: And I think you've talked a lot more recently as well about the data security and the security risk to hacking. And that maybe corporates are not spending as much, obviously, as they are. and CapEx on building out the data centers and the like, but should more emphasis be placed on security?
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Speaker 3: Yeah, I think we've got to get the balance right. So you want to be innovating at speed, you want to be managing the risk at speed as well. And this is really about moving fast, but retaining trust.
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Speaker 1: And that trust element is important.
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Speaker 3: I know we as a bank, as are all the large banks, putting a lot of money into making sure that we're hardening our cyber capabilities. As we're discovering any vulnerabilities, those are being made available to all so.
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Speaker 1: They can get patched.
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Speaker 3: And that we're doing everything we can to make sure that we can be on the front foot by protecting our clients' data, making sure that the resiliency is in the place it needs to be.
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Speaker 2: How much broadening out of the economy do we need to see, though? Because so much is tied to these areas of CapEx explosion in AI.
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Speaker 1: And I'm going.
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Speaker 2: To bring up Jensen Huang because one man has an indiscretion and then all the outsized reverberations of talking about the main cheerleader of AI is caught up in this and it raises questions about is there too much emphasis on one industry, one company in LA?
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Speaker 3: Look, I think AI is going to transform multiple industries. And our job is to make sure that that happens in a responsible manner and that that growth benefits everybody and that it's happening across multiple different industries. So remember, we're at the infra phase of this. That info is needed to support innovation and growth. I think both in the States and China are very well positioned with different models to make sure that that translates into GDP growth.
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Speaker 1: I think the.
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Speaker 3: Challenges for some other countries is can they get there? Can they make sure that they're also making the investments to enable innovation and entrepreneurship?
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Speaker 1: I was just in Turkey last week. they're building their first data center.
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Speaker 3: And they know that if they don't, it's going to be a problem for their competitiveness and for the growth of their economy going forward. So we just need to find the right way to do this. I'm confident we will.
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Speaker 2: How much of a litmus test is the anthropic IPO? I know cities involved in the retail are in the international aspect of that potential sale, which could be excess of $ 60 billion. So how much of a litmus test is that going to be for demand going forward?
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Speaker 3: Look, I think it's obviously a very important IPO coming up. It's a very exciting one. but it's part of Anthropic's journey. It will be getting its rating, it will be looking at the whole capital structure, and I think we're seeing the responsible development of a capital structure to support the growth of a company amongst a few others that will play a very important role going forward. So, I'm delighted to see this proceeding.
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Speaker 1: It is important.
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Speaker 3: And for the markets, I think it and if we then also see OpenAI next year, if we do, that will then open up for more of the other IPOs to occur.
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Speaker 1: I think there's certainly folk who are holding out for these two.
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Speaker 2: As we go into 2027, what do you see are the biggest risks right now to your business? I mean, the war is still going on. Inflation is still quite sticky. There doesn't seem to be any resolution going on with the war. We've seen the fissures developing in AI. China still needs to get its engine of domestic growth going. What's 2027, from your vantage point, going to look like? Because you're going to have a lame duck presidency as.
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Speaker 1: Well in Washington.
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Speaker 3: Look, we just came out of a record third quarter.
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Speaker 1: We've had a number of quarters of strong growth.
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Speaker 3: What I like about it is it's growth across all of our different businesses and different business lines. And part of that, our strategy is looking at making sure that we've got a diversified set of businesses that are for all seasons so we can be in a position to support clients as they're transforming and growing, but also helping build their resiliency. And I think that will be the game in 27. I would love it if it was a little bit more boring than 26 was. But I think the important piece here is let's keep the pace of innovation occurring.
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Speaker 1: Let's make sure that it's being done so responsibly.
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Speaker 3: And that responsibility is about resiliency.
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Speaker 2: You talked about your third quarter results. They were pretty strong across the board. Where do you think you need to improve better? I was looking at the equities division. It rose 14% year over year, but short of analyst estimates. You've rejigged some executives. I think Rob Smolin has come back to lead EMEA and UK equities. Are you satisfied with the pace of growth there when others, though, have outpaced you?
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Speaker 1: There is no CEO that's ever happy. I knew that was your answer. You always want more. We are on a very relentless, consistent journey.
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Speaker 3: I think we've shown we're showing the strategy is working. We're showing that we're making putting a lot of proof points on the table, making good progress.
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Speaker 1: There's a lot of upside ahead.
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Speaker 3: And I'm delighted that we're making the investments that are needed.
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Speaker 1: To keep the momentum going.
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Speaker 3: So I'm very positive around it, but one always feels you could do better.
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Speaker 2: I want to come full circle back before we wrap these things up about the securities venture. When is that going to be operational, and how do you see the pathway over the next 12 months of building that out? And how much did your time in D.C., perhaps with Xi Jinping, did it help smooth the gears, if you will? Yeah.
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Speaker 3: As you say, Citi has a pretty unique franchise in China already. 125 years supporting all the multinationals here, as well as supporting Chinese companies. In many ways, the security license just completes the product offering so that we can raise capital, we can trade, we can get better access to investors, and we can connect the bridges between China and the world and the world and China.
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Speaker 1: So it completes the offering for us.
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Speaker 3: And all I would say to our competition is watch out because we have this unique offering already from that global network, the history we've got.
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Speaker 1: And now with this in.
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Speaker 3: Six months time, we have six months to get this up and running and get it in the position to move forward.
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Speaker 1: And we're looking forward to doing so with speed and responsibility.