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Trade Services Provided by Citibank N.A., Bangladesh

Unit 1.0: Introduction

This report focuses on the internship pursued by Fahim Ishtiaque Hossain at Citibank N.A. in the Department of Trade. During his internship he was under the supervision of Mr. Mahmudul Haq and Mr. Syed Tofail Ali the academic and the on site supervisors respectively. The duration of the internship was three months and this report has been prepared to fulfill the requirements of BRACUniversity’s internship program.

1.1 Objectives

The objectives of the report have been classified into the following categories:

1.1.1 Broad Objective

The broad objective of the report is to explore the different trade services provided by Citibank N.A. in Bangladesh such as cash in advance, open account, on consignment, documentary collection and letter of credit.

1.1.2 Specific Objectives

The specific objectives of the report are as follows:

  • To examine the different trade and financial services provided by Citibank N.A. in order to facilitate trade.
  • To focus on how Citibank N.A. identifies its customers’ needs and provides them with suitable pricing solutions.
  • To analyze the customers’ satisfaction on the products and services offered by Citibank N.A. in Dhaka and Chittagong.
  • To study the different observations made at Citibank’s trade department.

1.2 Scope of the Study

This report analyzes the different trade and financial services provided by Citibank N.A. and also on the customer survey initiated by the bank in the month of February, 2005.

1.3 Methodology

The data for this report has been collected from both the primary and the secondary sources. For primary data different officials at Citibank N.A. have been interviewed and different aspects of the department have also been observed. For the secondary data a wide range of reading materials have been reviewed from the Internet, Citibank N.A. Intranet and various documents of the bank.

1.4 Limitations

Due to the presence of various limitations the subject could not be studied more profoundly. The most significant limitation of this project was that the topic being so theoretical, most of the report had to be prepared based on secondary information. Gathering primary data also posed problems as the organization may have not revealed all the facts and in some cases may have exaggerated about its operation. In addition to this, dependence on secondary information also meant that the information was often irrelevant or too generalized. There was a severe time constraint as the time allocated for this report was approximately two weeks.

Unit 2.0: Overview of Citigroup

Citigroup is one of the most renowned global financial service companies and is ranked among the 10th most respected companies in the world. The organization has engaged 300,000 employees serving around 200 million customers through a network of over 3,400 offices and branches in over 100 countries and territories. It serves consumers, corporations and financial institutions spanning around the developed and emerging economies of the world. Citigroup has the most diverse array of products and a well-organized distribution channel globally. It provides consumers, corporations, governments and institutions with financial products and services, including consumer banking and credit, corporate and investment banking, insurance, security brokerage and asset management. This has enabled the company to become one of the most powerful and successful companies in the recent times all around the world. Citigroup was the first company in the United States that provided financial services, banking, insurance and investment services simultaneously.

2.1 History of Citigroup

Citigroup was officially formed on October 8, 1998 with the merger of Citicorp and Travelers Group. The establishment of Citibank can be traced back all the way to 1812 when the state of New York charted the institution with authorized capital of $2million and paid in capital of $800,000. This new bank was known as the City Bank of New York and commenced its operation from 14th September 1812, to serve a group of New York merchants.

The bank later became known as The National City Bank of New York in 1865 when it joined the U.S. National Banking System. From the very beginning the bank dominated the banking industry and in 1894 became the largest bank in the United States. It was also the first to set up a foreign exchange department, which dealt with foreign exchange trading and later in 1929 became the largest commercial bank in the world. With continued expansion into other countries the bank formed the largest international bank by the year 1939 with one hundred offices in twenty-three different countries.

The first National Bank of New York eventually went under the ownership of National City Corporation, which eventually changed its name in 1974 to Citicorp. Later in 1976, the name of the bank was changed to Citibank and finally in 1998 Citicorp and Traveler’s Group merged to form Citigroup. The diagram below shows the different units operating under Citigroup:

Figure 2.1 Units Operating Under Citigroup

2.2 Citigroup’s Organization

Citigroup is largely organized into four groups: Citigroup Global Consumer Group, Citigroup Corporate and Investment Banking, Citigroup Global Investment Management, and Global Wealth Management. Citigroup Alternative Investments is another business that delivers a broad offering of alternative investments, including hedge funds, credit structures, private equity, real estate and other private placement and special investment opportunities. It is distinct from the other businesses and is managed through the CorporateCenter. A brief description of the most significant business activities found within each group are as follows:

  • Citigroup Global Consumer Group

The Citigroup Global Consumer Group deals with consumer products such as banking services, credit cards, loans and insurance. Citibank is included in this group.

  • Global Corporate and Investment Banking Group

The Global Corporate and Investment Banking Group attempts to meet all the financial service needs of corporations, governments, institutional and individual investors around the world.

  • Citigroup Global Investment Management

The Citigroup Global Investment Management provides investment management and related services to clients all around the world from beginners to wealthy individuals to both large private and public institutions.

  • Global Wealth Management

The Global Wealth Management division at Citigroup comprises three of the most respected brands in wealth management, which are:

(i)The Citigroup Private Bank,

(ii)Smith Barney and

(iii)Smith Barney Global Equity Research.

Global Wealth Management is a top-tier global wealth manager providing some of the best institutional capabilities available today. Serving both the private and institutional clients, Global Wealth Management taps the strength and resources of Citigroup to maximize values and services.

Citigroup believes that it offers a complete line of financial package by the provision of all the services simultaneously.

2.3 Product Lines

Citigroup focuses on nine product lines which are provided by its four groups and fourteen businesses. These product lines include:

  • Cards

Citigroup is the world’s largest provider of credit cards and it always strives to offer different credit card services to meet the needs of its customers. Some of the different types of credit cards offered by the organization are the Citi Advantage Card, the oldest airline rewards card available on the market and also the private label cards such Home Depot and Sears.

  • Consumer Finance

Citigroup has been providing credit and the knowledge to build better credit for over ninety years. They provide a wide variety of financing including real estate, home equity, auto and other personal loans. It is the largest finance business in the United States and a leader globally.

  • Retail Banking

Citigroup offers a variety of lending, insurance and investment services all around the world through Citibank. These services are distributed through 3,400 bank branches, 9,800 ATM and online banking services.

  • Capital Markets and Banking

Citigroup is the number one underwriter of Combined Debt Equity related transactions. It raised more than $543 billion in equity and debt for firms in 2003, almost $147 billion more than the nearest competitor. It completed 268 mergers and acquisitions in 2003 with a combined value of $ 204 billion.

  • Global Transaction Services

This product line focuses on cash management, treasury, trade finance, custody clearing, depository receipt, agency trust services and fund services to financial institutions, corporations and governments that are involved in business or have assets in multiple countries. Usually they require integrated reporting and management, which Citigroup help them achieve.

  • Life Insurance and Annuities

Citigroup focuses mainly on Retail Annuities, Institutional Annuities, Life Insurance and International Insurance Manufacturing, which tries to take advantage of demographic trends in industrialized countries. This product is ranked third in terms of net income in the United States through the business Travelers Life & Annuity.

  • Private Bank

The Private Bank offers financial services to some of the world’s most wealthiest and successful families. Besides traditional banking services, they provide advisory services, access to capital markets, trust services, estate planning and portfolio management. Many clients of this line require a customized service.

  • Asset Management

Citigroup is a leader in money management with over $490.50 billion in assets, under its management. Many individual investors as well as very large institutions turn to Citigroup for mutual funds, closed end funds, college saving programs, hedge funds and non investment and investment grade credit structures.

  • Private Client Services

Citigroup offers financial planning and advisory services to high net worth investors, institutions, corporations and private businesses. This includes asset allocation, private investments and lending services, hedge funds, cash and portfolio management and retirement, education and estate planning.

Unit 3.0: Citibank N.A., Bangladesh

Citibank N.A. is a 100% owned branch office of Citibank, New York and it commenced its operation in Bangladesh in 1987, by establishing a representative office in the country. The main function of the bank in Bangladesh was initially limited to correspondence banking, L/C confirmation, and credit appraisal of companies for Citibank Hong Kong, Singapore, India etc. Based on its strengths with respect to global network, expertise in financial services and technology, Citibank N.A. has been able to establish itself as one of the largest overseas correspondence banks for the nationalized banks in Bangladesh. It has also been a major player in financing trade and financial advisor to key national infrastructure projects. The bank started its full operation in Bangladesh from June 24, 1995 by establishing an office in Motijheel, Dhaka and another one on June 18, 2000 in Chittagong. A third branch was finally established in Gulshan, Dhaka on the May 2003.

In a very short span of time and with limited human resource, Citibank has been able to establish itself very well in the banking sector in the country. With its three branches in Bangladesh fully equipped with the latest technology and innovative products and services Citibank aims to provide the customers with the highest standard of international financial services. Unfortunately the operations of Citibank in Bangladesh are still conservative and limited to serving financial needs of the leading business and corporate houses through treasury operations, cash management, lending etc. The bank also provides correspondence banking services to local banks in order to facilitate trade and has recently introduced a new product called Speed Cash, which facilitates quick fund transfer for the Bangladeshi expatriates working in the Kingdom of Saudi Arabia.

3.1 Bangladesh as a Part of Citibank’s Global Market

Citibank worldwide is structured in two divisions:

  • The Global Relationship Banking (GRB) includes all the markets in the developed world and deals with those MNCs that are Citibank’s clients all over the world
  • The Emerging Markets (EM) includes the markets in the developing world and is again divided into three geographic segments:

-Latin America,

-Asia Pacific,

-Central and Eastern Europe, Middle East and Africa (CEEMA).

Bangladesh is one of the 74 countries that fall under the head of Emerging Markets and belongs to the region, Central Eastern Europe Middle East and Africa (CEEMA), which includes 38 countries. In each of such regions, countries belong to different clusters, which are usually formed with four to five geographically close countries and the representative from the largest country in the cluster is chosen to be the Cluster Head. The cluster in which Bangladesh belongs includes India, Nepal, Sri Lanka and Bangladesh and the Cluster Head Office is located at Mumbai, India.

The organogram of Citibank N.A., Bangladesh is on the next page:

3.2 Functional Areas of the Bank

The functional areas of Citibank N.A. are as follows:

  • Corporate Banking,
  • Financial Institutions,
  • Cash Management,
  • Trade and
  • Treasury.

The other departments, which act in support of the functional divisions of the bank, are as follows:

  • Operations,
  • Credit Administration,
  • Financial Control and
  • Human Resource.

3.3.1 Corporate Banking

Corporate Banking in Citibank is divided into two main segments:

  • Global Relationship Banking (GRB), in which the bank basically deals with those clients who deal with Citibank globally especially the MNCs in Bangladesh.
  • Top Tier Local Corporate (TTLC) is the segment in which only the top performers in the business world basically the first three ranked companies of any industry are approached to be Citibank’s clients.

The main activities involved in Corporate Banking division of the bank include communicating with customers and establishing contact with key corporate clients. Once Citibank N.A. starts dealing with these corporate clients, it monitors their performance in order to take decisions regarding further deals with the same clients.

In addition to this the corporate department every year has to submit a report to its cluster head based on the macro-economic indicators of Bangladesh and also the performance of its sub-sectors. Based on all these information a portfolio is prepared which focuses on the opportunities for Citibank of being involved in each of the sectors.

3.3.2 Products Offered by the Corporate Banking Division

Citibank provides both deposit and loan services to its corporate clients which are of varying tenor and purpose. The various products offered by the Corporate Banking Division are as follows:

  • Corporate Finance

The core commercial banking services compose of corporate finance and other credit products. Citibank offers a full range of financing options that are customized to meet the needs of its clients specially purpose, tenor, currency and other criteria. The various financing options offered by Citibank N.A. are:

-Credit Structures enhanced by Export Credit Agencies

-Commercial Papers or Fixed Income Securities

-Syndicated Loans

-Project Finance

  • Working Capital Finance

Working Capital Finance basically deals with the provision of funds for financing particular working capital needs, which can either take the form of short-term loans or overdrafts. Some common forms of working capital finance are:

-Financing of inventory or raw material purchase,

-Receivable financing for both export and domestic,

-Pre-export and Import Finance.

  • Trade Finance

Citibank’s global online system enables it to provide trade services to its customers in the form of swift processing services which is very crucial to any trade related services. Besides this the bank also enables its customers to open, amend and transmit L/Cs online from their own premises using Citibanking system. The major trade financial products and services offered by the bank are:

  • Letters of Credit
  • Export L/C Advising & Transfer
  • Guarantees such as Bid, Performance, Financial
  • Discounting/Refinancing of Acceptances and L/C
  • L/C Confirmation
  • Documentary Collections/Negotiations.

A new program named the Vendor Marketing Program (VMP) has been started by Citibank N.A. This program focuses on the RMG Manufacturing & Exporting units with customized credit facilities and trade charges for the clients.

3.3.3Cash Management Services

Citibank N.A. backed up by its banking technology is in a position to offer customized services and at the same time support high volumes of payments and collections. The bank provides services such as Worldlink, which enables effective transactions in more than 40 currencies through drafts or wire transfers. Simultaneously, the strong network of Citibank N.A., Bangladesh with the nationalized commercial banks in the country enables transactions to be resolved at every corner of Bangladesh.

On the other hand, the New York based automated check processing system of Citibank assists in obtaining proceeds of clean checks with the minimal of turn around time. With well-structured courier arrangements and relationships with other banks, Citibank is capable of substantially reducing transit time for local collections and thereby, assisting in better management of funds.

Citibank N.A., Dhaka in collaboration with Saudi-American Bank (SAMBA), Agrani Bank and Islami Bank as local counterparts has introduced new products like Speed Cash and Safe Draft to facilitate quick fund transfer for the Bangladeshi expatriates working in the Kingdom of Saudi Arabia. Citibank N.A., Bangladesh is now exploring the opportunities of extending similar services to other parts of the globe, especially in the Middle East countries, Great Britain and Malaysia where a huge of numbers Bangladeshis are working.

Major cash management products and services provided by Citibank N.A. are:

  • Account Services,
  • Domestic and International Payments & Collections,
  • Outstation Check & Cash Collections,
  • Cash Pick-up & Delivery,
  • Travelers’ Cheques,
  • Speed Cash,
  • Safe Draft,
  • Online fund transfer between Dhaka and Chittagong,
  • Innovative and competitive deposit products,
  • Web-based electronic banking services,
  • Prompt distribution of inward remittance at competitive rates,
  • Mobile banking.

3.3.4 Financial Institutions (FI)