Adding spice to life at Citigroup
Not all of the 20 KorAm Bank employees on a visit to Citigroup's New York headquarters were impressed with the South Korean lender's new owner.
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Despite ascending the glassed tower on Lexington Avenue that houses the world's largest financial group, touring its vast trading floor and being entertained by Chuck Prince, the chief executive, something was not quite right. “There is no kimchi!” shouted an employee while lunching in the corporate dining room, visibly horrified at the absence of the spicy pickled cabbage that is ubiquitous in South Korean cuisine. The incident prompted a solicitous Citigroup employee to make a trip to New York's Korean quarter to buy the pungent vegetable and avoid a gastronomic culture clash.
For Citigroup, though, successfully integrating the $2.7bn (￡1.5bn) KorAm acquisition its largest-ever investment outside the US and Mexico will take more than culinary resourcefulness.
Since beating the UK's Standard Chartered and Temasek, Singapore's government investment agency, in the race to buy KorAm from the US private equity groups Carlyle Group and JP Morgan Partners in February, Citigroup has worked on merging two widely differing cultures, systems and people.
At stake is more than just Citibank Korea, the enlarged group that will be the sixth-largest lender in one of Asia's most promising banking markets, with $57.4bn in assets, around 250 branches and some 5m customers. Senior executives at Citigroup regard the KorAm integration as the acid test for future expansion in higher-growth, higher-risk markets. KorAm's purchase could be a template for future acquisitions because it gives Citigroup what it lacks in many other countries: a large branch network and a significant exposure to small and medium-sized enterprises (SMEs).
The question is whether Citigroup can combine its global muscle and ability to deal with large companies with a local bank's strength in managing smaller accounts. “We have an established competency in acquisitions in the US,” says Michael Zink, head of Citigroup's corporate banking arm in Korea and a key figure in the integration. “But once you get out of the US, particularly when issues of culture and language become paramount, it's a matter of demonstrating that we can do it.
“We need a real live example and this is it. So the company is paying very close attention to how this goes. And the lessons learned are going to be studied carefully,” he adds. On the positive side, KorAm founded as a joint venture between local companies and Bank of America 21 years ago does not suffer from many of the inefficiencies and outdated working practices of larger and older Korean lenders.
The fact that Ha Yung-Ku, the chief executive who will retain this post in the new bank, worked for Citigroup for two decades before joining KorAm in 2001, should also help to bridge the culture gap. And in order to ensure a smooth transition, Korean will be the new bank's working language, defusing a potential flashpoint with local staff.
Nevertheless, Richard Jackson, Citigroup country manager and head of the integration task force, believes it will take a long time to achieve a full cultural unity. “When two rivers meet in the Amazon, one of them white and one of them black, they flow beside each other for 10 miles before eventually merging,” muses Mr Jackson, who is on his sixth integration of a Citigroup acquisition.
The US group got a taste of just how divergent America and South Korea's corporate practices are in June, when KorAm's workers walked out in what became the longest strike in the country's banking history. When it ended 18 days later, customers had withdrawn Won2,500bn ($2.2bn), 9 per cent of the bank's deposits.
Most of those funds have since returned but Citigroup's local staff went on strike for one day earlier this month to demand the same wage deal and no-redundancy pledge as the KorAm staff. Labour unrest an occupational hazard for South Korean companies has not dimmed Citigroup's determination to overhaul KorAm's compensation practices in a bid to increase profitability and efficiency.
Under the old regime, branch managers were rewarded more for lending money than for generating deposits an unbalanced system that deprived the bank of a crucial source of low-cost funds.
“We are giving deposits and assets an equal emphasis,” Mr Zink says. “It's a bit of a change in Korean banking to say ‘generate the deposits and you will be as well compensated as for generating the assets'.”
He admits such radical changes are not easily accepted by staff. “Clearly there is resistance all around. Human beings hate change,” he says. “[KorAm employees] don't say ‘I won't change'. They are saying: ‘I wanna buy-in, show me some respect, sell it to me'. The worst thing we could do is walk in drop the manual on the desk and say ‘there it is, boys read it'.”
But while the slow process of cultural alignment proceeds, other issues cannot wait. Mr Jackson, who will head Citibank Korea's consumer banking business, says the priority is to make customers feel it is business as usual. To that end, the banks have set up an interim link between their computer systems to assist communication while an integrated IT structure to be completed by the end of 2006 at a cost of about $40m is built.
The other crucial decision for both Citigroup and the new bank's customers was the choice of a risk management system. In a country where many banks are still reeling from last year's bursting of a credit card bubble, analysts expected Citigroup to impose its own system on its target.
Mr Ha rejects this view, arguing that KorAm has fared better than other domestic competitors in preventing an explosion of bad loans. “We have a more systematic approach [to risk than other Korean banks]. We are combining the best of breed from each side. You cannot say that we're just going to blindly follow Citi's credit system.” But in future, the new bank will rely less on branch managers' experience and financial records and more on its top managers' ability to identify economic trends and potential problems among customers. “We are not going to take away all the autonomy of the branch manager. We think that's a mistake,” says Mr Zink.
“What we'll do here is what [Citigroup] does everywhere else . . . we'll be asking what could go wrong. We are not going to wait [for problems] to show up in financial figures because then you are 12 to 18 months too late.”
Swift implementation of the new system will be crucial to the performance of the combined group. With SMEs a sector vulnerable to the recent economic weakness accounting for more than a third of KorAm's loans, the new bank will have to be clinical in spotting troubled borrowers.
Citigroup officials say the SME exposure is what they were looking for. Competitors such as HSBC, however, will be studying its progress in dealing with KorAm's traditional SME base before deciding whether to pursue a South Korean acquisition.
With pressure from both top management and its fiercest rivals, there will be no need for kimchi to spice things up in the first few years of Citigroup's biggest foreign purchase.
Pillars of performance at the new group
● The internal strategy: to apply Citigroup's credit and risk management discipline at KorAm while preserving the independence of experienced South Korean branch managers.
● The external strategy: to sell more Citigroup products (foreign exchange, derivatives, cash management) to KorAm's existing customer base of up to 40,000 small- and medium-sized companies.
● The retail bank: Citigroup to introduce its systems for assessing customers and marketing credit cards. Renewed focus on wealth management for rich individuals.
● Compensation: Branch managers to be equally rewarded for generating deposits and making loans in line with Citigroup practice. Previous KorAm policy rewarded lending volumes more than deposit generation.
● Countering bad loans: Citigroup to introduce monthly meetings of key management to analyse the economic situation and identify the sectors and customers that might be in trouble with loan repayment.
● Integrating cultures and systems: Citigroup and KorAm to use “gap analysis” going through the business units, spotting the differences between the practices employed by the two banks and choosing the best of the two. Citigroup will not always prevail.
● 给花旗加点韩国风味
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● 二十位韩美银行(KorAm Bank)雇员造访了花旗集团(Citigroup)纽约总部，但并非所有的人都对这家韩国银行的新主人有好印象。
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● 这家全球最大的金融集团坐落在位于列克星敦大道的一幢玻璃墙大楼中。尽管登上这座大楼，参观了巨大的交易大厅，还得到花旗首席执行官查克?普林斯(Chuck Prince)的款待，但还是有些不太对劲。“没有泡菜！”一位雇员在公司餐厅吃午餐时叫道，显然对于缺少韩国菜肴中常见的辛辣腌白菜感到吃惊。这一突发事件促使一位热心的花旗雇员跑到纽约的韩国社区，去购买这种辛辣的蔬菜，从而避免了一场烹饪文化冲突。
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● 但对于花旗集团来说，要成功整合耗资27亿美元（合15亿英镑）收购来的韩美银行，光有烹饪上的足智多谋是不够的。这是迄今为止花旗集团在美国和墨西哥以外进行的最大一宗收购。
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● 今年2月，花旗集团击败了英国渣打银行(Standard Chartered)和新加坡政府投资机构淡马锡(Temasek)，从两家美国私人股本集团卡莱尔集团(Carlyle Group)和大通合伙人公司(JP Morgan Partners)手中竞购到韩美银行。自那以后，花旗集团一直在为融合两种迥异的文化、系统和人员而努力。
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● 韩国是亚洲最有希望的银行市场之一，扩大后的韩国花旗银行(Citibank Korea)将成为韩国第六大银行，拥有574亿美元资产，约250家分行，以及500万左右客户。而将面临风险的并不仅仅是韩国花旗银行。花旗集团的高级管理人员认为，整合韩美银行是一项严峻的考验，从中将看出集团未来能否在增长更快、风险更高的市场进行扩张。对韩美银行的收购可能是花旗未来一些收购的范例，因为它为花旗提供了集团在许多其它国家所缺乏的东西：一个大型分行网络，以及大量中小企业贷款业务。
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● 花旗集团具有全球影响力以及和大公司打交道的能力，而作为韩国本地银行，韩美银行具有管理较小规模客户的实力。问题在于，花旗集团能否把两者的优势结合起来。“我们有着在美国进行收购的稳固能力，”花旗集团驻韩国的公司银行业务部门负责人、本次整合的关键人物迈克尔?辛克(Michael Zink)表示，“但一旦你走出美国，尤其是当文化和语言问题变得极为重要时，那就需要证明我们能够做到。”
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● “我们需要一个活生生的例子，这就是一个。因此公司正非常密切地关注事情的进展。而从中获得的经验教训将得到仔细研究，”他补充道。一些规模比韩美更大、历史更久远的韩国银行，它们的效率低下，业务实践也已过时。从积极方面来看，作为一家21年前由当地企业与美国银行(Bank of America)成立的合资企业，韩美银行没有遭受上述弊端的损害。
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● 韩美银行的首席执行官河永求(Ha Yung-Ku)将继续担任新银行的首席执行官。他在2001年加入韩美之前，已为花旗集团效力了20年，这个事实也将有助于弥合文化差距。同时，为了确保平稳过渡，韩语将成为新银行的工作语言，排除了与本地员工触发事端的一个潜在因素。
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● 然而，花旗集团国别业务经理、整合事宜特别工作组负责人理查德?杰克逊(Richard Jackson)认为，达到完全的文化融合需要很长时间。“当一黑一白两条河流在亚马逊河交汇，它们先是泾渭分明地流淌了10英里，最终才汇合在一起，”杰克逊先生说道。他已是第六次负责整合花旗集团的收购对象。
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● 今年6月，韩美员工举行了韩国银行业历史上最长的罢工，花旗由此体会到，美国与韩国的企业操作截然不同。18天后罢工结束时，客户已提走2.5兆韩元（合22亿美元），占银行存款的9%。
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● 后来，这些被提取的资金大多存回了银行，但花旗的韩国员工又在本月初举行了为期一天的罢工，要求得到与韩美员工一样的工资待遇，以及不裁员的承诺。劳工纠纷是韩国公司的职业性风险之一，但这并未打消花旗的一个决心，即彻底改革韩美银行的薪酬做法，以增强获利能力和工作效率。
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● 根据旧制度，各分行经理放贷获得的奖励超过他们产生存款获得的奖励，这是一个不平衡的体系，使银行失去了至关重要的低成本资金来源。
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● “现在我们对存款和资产同样重视，”辛克先生说，“在韩国银行业，声称‘创造存款，你将得到与创造资产一样好的报酬’，这有点像是改革。”
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● 他承认，如此激进的变革不容易被员工接受。“显然，到处都有抵触情绪。人类讨厌变革，”他说，“(韩美银行雇员)不说‘我不想改变’，他们说‘我希望得到解释，给我一些尊重，说服我吧。’最糟糕的做法就是，走进他们的办公室，将操作手册扔在桌上说：‘就在这里，大家看一看’。”
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● 但是，虽然文化上的协调要慢慢来，其它问题却不能等了。将领导韩国花旗银行消费银行业务的杰克逊先生表示，首先要考虑的问题，是如何让客户们感觉一切照常。为达到这一目标，两家银行已在它们的电脑系统之间建立了临时关联，以帮助它们之间的交流，同时，一个整合的信息技术(IT)架构将在2006年年底前建成，耗资约4000万美元。
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● 对于花旗集团和新银行的客户而言，另一项重要决策是对风险管理系统的选择。在韩国，很多银行尚未从去年信用卡泡沫破裂的打击中恢复过来，因此分析师预计，花旗集团将把自己的风险管理系统在新银行实施。
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● 河先生否定了这种观点，他声称，在防止坏账激增方面，韩美银行比国内其它竞争对手都做得好。“(与其它韩国银行相比)，我们有个更系统化的（风险管理）手段。我们将把双方最好的东西结合起来，不能说我们将盲目效仿花旗的信贷系统。”但在未来，新银行将较少依赖分行经理的经验和财务记录，而是将更多地依靠其高层管理人员识别经济趋势和客户中潜在问题的能力。“我们不会取消分行经理所有的自主权，我们认为那是个错误，”辛克先生说。
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● “我们将在这儿干的，（花旗）在其它各处都做……我们将问一问，什么会出错呢？我们不会等待（问题）以财务数据的形式出现，因为到时候你已经晚了12到18个月了。”
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● 迅速实施这个新系统对于合并后集团的业绩表现至关重要。由于中小型企业占了韩美银行贷款的逾三分之一，而这个产业部门易受近期经济疲软的冲击，因此新银行在找出陷入困境的贷款企业时必须相当客观。
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● 花旗集团的官员表示，中小型企业的信贷业务正是他们所寻求的。但在决定是否收购一家韩国企业前，汇丰(HSBC)等竞争对手将会研究花旗在处理韩美银行传统中小型客户群方面的进展状况。
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● 由于最高管理层和集团的劲敌都施加了压力，因此在花旗集团这笔最大海外收购交易的前几年里，并不需要再用泡菜来增加刺激。
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● 新集团的业绩支柱
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● 内部战略：将花旗集团的信贷和风险管理机制运用到韩美银行，同时保持有经验的韩国分行经理们的独立性。
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● 外部战略：向韩美银行现有多达4万中小企业客户群出售更多的花旗产品（外汇、衍生产品、现金管理）。
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● 零售银行：花旗集团将引入其评估顾客和营销推广信用卡的体系。重新将重点放在为大户理财上。
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● 薪酬：根据花旗集团的行为规则，分行经理吸引存款或进行放贷，将获得同等的奖励。依照韩美银行原来的政策，对提高放贷的奖励高于对吸引存款的奖励。
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● 控制坏账：花旗集团将引进关键管理层月度会议制度，以分析经济形势，并确认还贷可能出现问题的产业和客户。
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● 整合公司文化和系统：花旗集团和韩美银行将在各业务单位贯彻使用“差异分析”，找出两家银行采用的各操作实务之间的差异，并从两者之中选出最好的。花旗集团并非总是首选。
