Citigroup shoots for Japan top spot


Citigroup is pushing for the top in a highly competitive industry but says competitors falling by the wayside will help it do that

TOKYO, Japan (Reuters) -- Citigroup, the world's largest financial services firm, said on Wednesday it aims to grab a top spot in Japan's highly-competitive consumer financing market.

It will do that, it said, by boosting outstanding loans by 13 percent this year.

The group aims to raise the sum to 1.7 trillion yen ($13.3 billion) by the end of 2002, from a current 1.5 trillion yen.

That would edge it closer to industry leader Takefuji Corp, which held 1.78 trillion yen in loans at the end of February.

A spokesman for Citigroup in Tokyo said it wants to claim a top post in the Japanese consumer financing market, where it expects further consolidation to trim the number of top players to three or four, from around 10.

The spokesman said the group can also take advantage of its high credit ratings, which allow it to raise funds at more competitive rates than domestic rivals.

Snapping up rivals' loans

Citigroup has been active in snapping up loans from other firms, including the latest purchase of loans from Japanese mid-sized lender Marufuku for 61 billion yen.

That purchase, made a week ago, made the American giant the third biggest player as measured by size of lending -- only two years after it entered the market.

Citigroup entered the market in 2000 when it took over Associates First Capital, a U.S. group that had a strong presence in Japan. It has since expanded its operation through acquisitions.

The group's consumer finance division currently operates nationwide branches with some 6,800 staff in Japan.

Its expansion in consumer finance operations follows similar moves by Japan's top banking groups, which are taking advantage of virtually free money provided by the central bank and charging interest rates of up to 29.2 percent for consumer-finance loans.

Banks must operate under strict screening standards and therefore focus much of their retail lending on housing loans, which carry low interest rates.

'Brush up on risks'

By joining up with consumer credit firms, banks are hoping to rake in more profits by charging higher interest.

"There is already a cap in interest charged on loans and fund-raising costs are set to edge higher. In order to stay profitable, companies must cut costs to absorb potential loan losses. They must also brush up the skill to control risks," said Credit Suisse First Boston analyst Norimasa Ejiri.

Some leading Japanese consumer financing companies as well as GE Capital are eligible to clear the standard and Citigroup has the potential to join in the rank of such players, he said.

GE Capital, a financial service unit of General Electric Co was another active foreign player in this segment after making an entry in 1998 by taking over Japanese lenders.

Demand for consumer financing is growing. According to one industry survey, consumer financing firms' market share in retail loans doubled in 1999 to 13 percent from 6.4 percent in 1991.

This March, Mitsubishi Tokyo Financial Group Inc (MTFG), Japan's third-largest banking group by assets, partnered with Acom Co., Japan's number-two consumer credit firm in terms of outstanding unsecured loans, to create consumer loan venture Tokyo-Mitsubishi Cash One Ltd.