Turmoil in Asia Markets — Recap – Wall Street Journal (blog)

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In a period of uncertainty over everything from negative interest rates to how well-capitalized banks are, some investors are wondering how much exposure to emerging markets and China they can stomach. Banks that rely on global businesses to fuel revenue are in a position of having to reassure clients and investors alike that they can weather the turmoil.

For Citigroup, for example, revenue from Asia totaled just more than $13 billion in 2015, accounting for 17% of total revenue for the year.

“At times in the past Citi’s globality has been a positive, but in the current environment of slowing global growth and concerns around emerging markets, investors naturally worry more about Citi than others,” analysts at Sanford C. Bernstein wrote in a note on Thursday. Citigroup is down 32% this year.

Still, the analysts concluded that “while weakening global macro conditions present risk to Citi’s revenues and credit costs (and therefore our current EPS estimates), we believe these risks are manageable in the context of the company’s [pre-provision net revenue], liquidity, revenues and capital.”

Last month, Chief Financial Officer John Gerspach said Citigroup had been reducing its commercial loan exposure to China “year-over-year as we’ve seen the economy slow,” and that that portfolio “has been broadly stable.” Within its corporate loan book in China, Mr. Gerspach said more than 90% of such loans are to subsidiaries of large multinationals headquartered outside China, or to large state-owned Chinese companies. The “vast majority of this portfolio is also investment grade,” he said.

Citi has long been bullish on Asia, with plans to expand divisions there like wealth management.

Citigroup executives including Chief Executive Michael Corbat, Chairman Michael O’Neill and Mr. Gerspach have bought shares of the company in recent weeks.

Turmoil in Asia Markets — Recap – Wall Street Journal (blog)}