THE FRIDAY INTERVIEW:Aidan Brady, Citi chief country officer
IRELAND’S INTERNATIONAL financial services industry needs to get its act together by diversifying away from servicing funds, developing a clearer vision for itself, and getting out and marketing more, according to one of the stalwarts of the IFSC.Aidan Brady, chief country officer with Citi, is concerned that the sector is too exposed to fund services, and should instead be looking to develop other ends of the business, particularly in technology.
“What I worry about is diversification; it’s too heavily weighted on funds. As an industry we need to get our act together a little better. We have far too many industry bodies, and we’re not marketing ourselves enough.”
While funds servicing may be the big success story of the IFSC to date, accounting for most of the companies and employment, Brady is concerned that such dependence may bring risks with it.
“I wouldn’t like to be a monoline, one-line business because things change rapidly . . . Funds services is a good business but it’s people intensive and it’s a tough business to make money in. Some do, some don’t. The best business to be in is transaction services.”
Indeed, Brady sees Citi’s Irish operation, where up to 90 per cent of the business is in the aforementioned transaction or Global Transaction Services (GTS), as a template for future development. “Just look at what Citi’s doing. I’d say it’s the model for IFSC financial services.”
Brady is well placed to offer advice given the amount of change his own bank has seen since it opened its first branch in Ireland back in 1965.
One of the longest-serving international banks in Ireland, it will mark its 45th year of business here next year. From its beginnings on Dawson Street, the bank has grown to become the second largest employer in the IFSC, behind State Street, with almost 2,000 employees.
Having set up initially to provide services to Irish subsidiaries of foreign corporations, in 1993 the bank moved to the nascent IFSC to exploit opportunities in the offshore market, and got its first big boost in 1995 when its parent decided to centralise a lot of back-office operations in Dublin.
However, by the end of the century Brady, who first joined the bank in 1985, could see that the writing was on the wall in terms of some of the functions which had been moved to Ireland. The bank again rejigged to focus on transaction services, which encompasses transactional banking products, funds servicing, custody and securities products.
This decision was to prove both timely and fortuitous, and has helped the institution weather both the over-heating of the Irish economy and the global financial storm.
While financial services firms around the world – including Citi’s parent – have taken a hammering in the current crisis, Brady is thankful that the Irish operation has concentrated on transaction services.
“We are so lucky to have concentrated on that particular end of the business,” he says, adding: “Amazingly, out of the whole of Citi we’re in transaction services which have grown through the past two or three years. Yes, it’s been tough but we haven’t been as badly hit as other parts of Citi or other financial institutions.”
Indeed, the Irish operation turned around a profit of €520 million in 2008, contributing about €140 million in tax to the Exchequer.
While Brady concedes that some people may find transaction services the “unsexy” side of banking, he points out that it’s actually a “fantastic business” because “one, it’s annuity, and, two, it’s profitable”. Moreover, it’s a sector which is growing.
The bank has also extended its traditional banking reach. With the Irish-based bank starting to build up a lot of capital, the decision was taken to establish it as a headquarter location, managing branches of Citi in eastern Europe. Four branches are now being run and regulated out of Dublin – Slovakia, Hungary, the Czech Republic and Romania – although Brady adds that expanding this remit isn’t on the agenda.
The bank used to run a treasury outsourcing division but closed it last year because the business was no longer profitable enough.
Like all IFSC firms, Citi suffered from poor retention levels during the boom as an over-heated economy and plentiful jobs meant that staff turnover rates were as high as 30-40 per cent, particularly among funds companies. This meant that the IFSC lost a lot of potential new projects, with Citi itself losing a technology division to Belfast “purely because of staff turnover and lower costs to an extent”, says Brady.
Now the problem is the opposite as firms look to hive off less complex activities to lower-cost locations in eastern Europe and Asia. In 2008 alone, Citi moved 440 job functions out of Dublin. At the same time it moved in 550 positions “at a much higher skill level”, says Brady.
It is this diversity which Brady cites as being key to Citi’s success.
“I really think the future of the IFSC is what we’re doing. It’s a broader range; not to be too pigeon-holed into one product set.
“We’ve a full range of products, most of which come under transaction banking, that gives us great diversity. So when we lose roles to Poland and India because they can do it more cheaply or whatever, we always have the opportunity to move people up to the next level.”
One of the aspects of Citi’s evolution of which Brady is most proud of is the establishment of its research and development (RD) centre, which opened recently and is Citi’s only dedicated RD facility worldwide. This centre is set to work on two big projects for the Citi group – the next generation development of Worldlink, the bank’s payment services product, and the bank’s electronic banking platform – and has already resulted in 40 new employees, with nearly 100 expected to be employed by the end of 2010 and into 2011. “What’s fantastic about it is once you do the development of the products you can sell the platform to other banks. So in some ways we’re also becoming a technology company.”
However, while Brady is keen to see the IFSC move up the “value chain” by attracting more skill-intensive projects, he won’t indulge long-held dreams to have Dublin full of front-office trading activities.
“When the IFSC was set up first everyone thought it would be traders and fund managers – that isn’t going to happen. Any time we’ve tried that it’s ended a little bit in tears.
“Where Ireland should be good at is transaction services – technology in funds is a very good example of that – but it needs to be more than funds.”
To realise this vision the IFSC needs to work a bit more on its image.
“If you look at the advantages Ireland had a few years ago, we had low costs, excellent people coming out of colleges, support from government, and a very good image as a well-controlled location.”
While he notes that most of these factors are still in place, what has been damaged is Ireland’s reputation.
“When I think of Singapore I think of technology; when I think of Luxembourg I think of funds; when I think of Switzerland, private banking; and the city of London, financial services.
“But when you think of Ireland you think of property speculation.
“What we have lost out on is image. If you take the logic of that we have to repair our image, and how do you do that? You get out and market your boots off.”
Strict regulation also needs to be a byword for the IFSC in the future.
“I’m in for really tough regulation. I’d prefer to make it tough for people to be in Ireland…In some ways I’d prefer the regulator to be too strict than too lenient – look what too lenient did to us.”
The challenge is to transform Ireland’s image from where it is now into a real knowledge economy – and this may mean overturning the Government’s decision to reinstate the remittance basis of taxation for foreign professionals, which wasn’t done, as had been hoped, in the recent Budget.
“If it’s a knowledge economy, everything has to be high end. There is no point having low corporation tax if top people aren’t going to come here because of high personal tax rates.”
In the meantime, Brady will push on with his plans for Citi, hoping to bring the rest of the IFSC with him. “If it works that well for us, why doesn’t it work for them? That’s the way we’re thinking.”
ON THE RECORD
Name: Aidan Brady
Age: 55
Position: Citi country officer, Citi Ireland and chief executive, Citibank Europe plc
Homes: Dublin and Wexford
Family: Wife Liz and two children, Jonathan and Jessica
Hobbies: Golf, football and motorcycling
What you might expect: He remains a lifelong supporter of Liverpool Football Club despite recent performances and lack of silverware won!
What might surprise: He is a keen motorcyclist and travels around by motorbike for both business and pleasure
