Last month, the World Bank released a report claiming a dramatic shift in capital and investment away from the developed world and into the emerging markets. As this trend accelerates, only one U.S. mega bank appears ready to capitalize.
The case for globalization in three charts
This chart clearly demonstrates a marked change in the long-term trend in global investment dollars. From 1965 to 2000, high-income, developed economies attracted the vast majority of global investment. Over the 10-year span since then, the developing world has nearly completely caught up. Take particular note of the steep decline in the high income trend during the period from 2007-2009; for developing economies, the same period showed hardly a blip in the trend.
The scale of the change is even more apparent when shown as a percentage. This chart even more clearly shows the stability in global investments from 1965 to 2000, followed by the dramatic change. Clearly, an unprecedented amount of investment is now flowing into the emerging markets.
With the change in the global investment trend to developing markets, banks must now adapt to capture the changing reality. Since 2000, the savings rate of developing economies has, once again, rapidly approached the level of developed economies.
Taken together, this change represents a fundamental shift in the long-term core banking marketplace. Gross investment in the emerging markets increased over 400% to $6 trillion from 2000 to 2010. The World Bank forecast this trend to continue through at least 2030.
With global investment dollars increasingly in emerging markets, banks too must focus on those markets to win the loan, M&A, capital market, deposit, and asset management opportunities today, and more importantly, tomorrow.
Citigroup: The global U.S. megabank Citigroup Inc (NYSE:C), with operations in over 90 countries, is unabashedly the bank most focused on building a global business. Overall, international businesses contributed 58% of the bank's $78 billion in total 2012 revenues.
For Q1 2013, Citi's global consumer banking business reported revenue of $4.9 billion, nearly equal to the $5.1 billion reported by its North American consumer unit. This corresponds with loan balances, where international consumers represent 49% of total loans, or $142 billion.