Citigroup Inc (NYSE:C) rightly sees itself as a global bank. For the first quarter of 2013, fully 53.1% of its revenue came from overseas operations. But how many industry observers saw this move coming? Citi is set to open an office in Baghdad, Iraq.
You have to start somewhere
According to Financial Times, the announcement will be made next Monday. The office will only be a representative one, and Citigroup Inc (NYSE:C) be prohibited from offering bank services outright, but it will be the first American bank to have an office of any sort in the war-torn country.
The Baghdad office will be set up this year, and the superbank has plans to open two more in the country, one of which will be in oil-rich Erbil. And that’s really the point of setting up shop in Iraq: to tap into what Citigroup Inc (NYSE:C) analysts see as a potential $2.0 trillion economy, fueled by oil production.
Corbat’s big bet
Citigroup Inc (NYSE:C)’s overseas operations are more than its bread and butter, it’s the bank’s secret sauce. Overseas operations are where Citi’s future growth is going to come from, and CEO Michael Corbat’s bold move into Iraq is a smart one, if a bit risky.
The $2.0 trillion Iraq economy isn’t expected to materialize until 2050, when, presumably, the country will have gotten its act together. At the moment, it doesn’t look like it’s in too big of a hurry to do so. Violence is still rampant there. The same day of the Boston bombings, 31 people were killed and more than 200 were injured in bombings across the country. Violence like that isn’t only terrible for people, it’s terrible for commerce.
Speaking of which, the oil industry that Citigroup Inc (NYSE:C) is counting on for economic growth was devastated in the 2003 American invasion and ensuing fight to secure the country, as well as years of economic sanctions before that. But without risk, there’s no reward, and it’s reasonable to assume that decades from now, the people of Iraq will have sorted themselves and their economy out.