Just over a year ago, Citigroup officially launched its Commercial Banking business in Germany. Since then, a lot has happened in the business with small and medium-sized corporate clients, as Citi's Head of Germany Stefan Hafke and Raphael Doerling explain in an interview with Börsen-Zeitung. Doerling, who joined Citi from ING in March 2021, has built up the business segment and his team from scratch. Initially a one-man show, Doerling's team grew to five employees by the end of 2022. By the end of 2023, there were 20 - all pure customer advisors and credit analysts here on site, as Doerling emphasises.

Citi has more than doubled the number of clients in German Commercial Banking in 2023. "We currently have almost 70 active clients that we support here in Germany," says Doerling. At the beginning of last year, there were still only 30. The target for the next two years is 200 clients that Citi would like to serve globally from Germany. "If we achieve this goal by the end of 2024, that will be good," says Doerling.

The two Citi bankers do not wish to comment on Citi's exact earnings figures with German commercial banking clients. "At the end of this year, we will be at eight times the previous year's figure," says Doerling, who continues to expect growth rates of 100% and more in his business segment. According to Head of Germany Stefan Hafke, Commercial Banking's income at the end of the year will come from zero to around 10% of what Citi earns with existing clients in the corporate sector.

According to Hafke, Citi has set a global total return target of 11 to 12% across all products and business areas, which the bank is currently not achieving. "Now, of course, the product mix with cash management is one that is normally significantly higher," says Hafke. According to Doerling, this is certainly one of the reasons why Citi is focussing on commercial banking in its growth plans - and not just in Germany, but throughout Western Europe.

The current market share in German commercial banking is still manageable at 70 customers. However, Doerling sees the potential to grow to a significant figure. "Several percentage points should be the goal," says Doerling. It simply makes sense to invest in this market, as it is enormously diversified. "If I just do a rough screening, I'll probably end up with over 1,000 customers that fall within our target market," says Doerling.

In the future, the client portfolio is to include more "traditional" SMEs. According to Doerling, Citi has started in German commercial banking with clients from the digital high growth sector, i.e. young technology companies that want to grow particularly quickly and internationally. Doerling cites the digital tour and experience platform Get Your Guide, whose global payments are processed by Citi, as an example of this. Of the current 70 customers, just over half are still digital customers.

Of the 200 target customers at the end of 2025, 130 are expected to come from the traditional SME sector. "But we are flexible here. If we get more in on one side than the other due to external factors, then that's just the way it is," says Doerling. As an example of a traditional SME customer, Doerling cites the Wuppertal-based Coroplast Group - an automotive supplier that manufactures adhesive tapes, cables and cable harnesses and currently has a turnover of around 700 million euros, but is on track to reach a billion euros in the coming years. "We will handle the entire international cash management for them," says Doerling. In addition, the next step for Citi is to fully automate Coroplast's foreign currency management.

As in corporate banking, where Citi serves large multinational corporations, the bank does not build its business relationships with SMEs on the lending business. Unlike many other foreign banks in the past, Citi does not want to lure German SMEs with loans in the hope that this will eventually turn into a profitable business relationship. This does not mean that the US bank will not have some flexibility in its balance sheet. Citi is prepared to invest in a business relationship. "We want to make credit available to customers who use more than just the loan," says Doerling.

Above all, the bank is targeting the international business of corporate clients. The bank is self-confident here: "I would say that Citi is the remaining global bank," says Hafke, citing the branches in 95 countries, from which 160 countries are served. "If a medium-sized company is active in Kazakhstan, Tunisia or Paraguay, there is no other Western bank that is there to support them," adds Doerling. On average, Citi supports German clients in more than 80 countries.

According to Doerling, around 70% of income in Commercial Banking this year comes from cash management - with a combination of interest and commission income. When Citi handles the global cash management of clients, the bank can work with the client funds stored in the interim. As these deposits are so-called operational deposits, it is also much more difficult for clients to withdraw them compared to sight deposits. Thanks to the turnaround in interest rates, banks can currently invest money with the ECB at a risk-free rate of 4%, for example.

However, in a year with significantly more capital market activity, Citi's revenue mix also includes significantly more commission business. For example, Citi advises German start-ups on financing rounds or assists them with IPOs. According to Doerling, however, it is often enough for start-ups to have one bank for 20 countries instead of 20. "Where Citi is present and has a full banking licence, we normally handle everything," says Doerling. Thanks to the strong representative offices, companies in many countries can do without local banks.

Citi is also likely to have benefited from the bankruptcy of Silicon Valley Bank in the US in the spring when courting start-up clients this year. During this time, clients were looking for stability. "We have connected new clients and they have also brought money with them," says Doerling. When selecting clients, Citi makes sure that they are truly digital companies. "Anything that is very strongly software-driven are topics where I'm not very worried," says Doerling.

He takes a critical look at supposedly digital business models that are not actually digital. As an example, he cites food and grocery services from the past or, more recently, We Work, where there are always physical assets in the end that have to be financed via credit - and Citi is reluctant to do that.