June 02--Don't be thrown off by Neil Corney's British accent and manners -- the Citi Israel CEO is deeply familiar with the local capital market. He has held a number of different positions in the local market over the past 17 years. Corney, who immigrated from the UK at age 22, was appointed Citi Israel CEO last November, after nine years during which he held a variety of positions at Citi Israel, and after managing the trading room at Bank Hapoalim (TASE: POLI).
During the three years in which he managed Citi Israel's capital markets department, Corney had the opportunity to take part in quite a few IPOs of Israeli companies, as well as Israeli government bond offerings. In his first interview with "Globes," he explains that, despite the pessimism among the Israeli public regarding the financial future, outside of Israel, investors view Israel in a very positive light.
"Three years ago, the issue of Iran was very troubling to foreign investors, and it was all they would ask about, but that has passed," he says. "Today, people see Israel as a solid place -- not the most exciting in terms of yields, compared with emerging markets, but for a pension fund that wants long-term yields, it is a good investment. Israel is still considered an emerging market, on the one hand, and on the other, a solid, stable market.
Does the talk of a European boycott of Israel influence foreign investors?
"I'll tell you a short story about this: a few months ago, we led a government bond offering. I went on a road show, and just then news broke about the Dutch pension fund that announced it was ending its investment in Israeli banks. We were very worried about the timing of the announcement, and that it would harm the offering. But in the 20 meetings we had with foreign investors, it never even came up. The only questions that arose were that there must be something not good about the economy -- what is it that is worrisome about the economy."
How do you explain the fact that outside of Israel we are perceived as a healthy, growing market, and here in Israel, the sense is that the economy is slowing down and worsening?"
"Relative to the world, our situation is good. There aren't many places overseas, including London and New York, where you will see all the restaurants full in the middle of the week. The foundation here is very good, and we see it in our R&D center here as well -- we have a hard time recruiting talented people when all the companies fight over every good engineer."
What about the claim that Israeli regulation is excessive and is strangling the business and financial sectors?"
"I was recently in the US, and they spoke at a conference there about regulation in the US and Europe. They said that in three more years, people will dream of the regulation we have today. Regulation will only become more stringent. Anywhere the regulator can set his foot down, he will.
"From what I see, the regulators here do not try to invent the wheel, rather, they look at what is going on abroad, adopt it, and adapt it to the local market. I believe that regulation will increase, and Israel will continue to come into line."
What are your targets?
First of all, Citi defines its targets by country. Israel is in a group of 19 countries in Western Europe, and it is the only one among them that is classified as a place worth investing in for growth. There are countries for which the primary goal is to minimize expenses, and in Israel the goal is to increase revenue. Citi sees Israel as one of its most important targets for 2014."
How will this growth be expressed?
"One area that Citi sees as a growth engine is financing in the gas sector. We are also involved in advising international companies, like Woodside, and we were the underwriters for the Delek Group bond offering abroad, after the loan we gave them. These are activities that require approval from above, and if they were to transpire in another country, it would have been harder to get approval.
"Another area is investment banking. Citi works with many international companies, like Microsoft, that are interested in Israel. More and more, they come here looking for opportunities. We invest tremendous resources in helping big companies that want to invest in Israel."
Citi sees another growth engine in working with local financial institutions to trade in foreign markets. "We see a lot of money flowing to them every month. The amount of money that goes into Israeli financial institutions is tremendous. I don't know of any other place in the world with such high pension contributions," says Corney, and adds, "The financial institutions have too much money to invest only in the local market, and they are going abroad. The financial institutions had a few adventures -- things that seemed attractive abroad, but they got burned, and that's why it is very important to choose an entity that will advise them on these investments."
We are the buffer for the foreign markets
What is your advantage? Why should the Israeli financial institutions work with you?
"We understand foreign as well as local regulation -- we are regulated by the Bank of Israel. In addition, our broad geographic reach is a significant advantage, as we have trading systems in many countries. We are essentially a buffer for the [Israeli] financial institutions when facing the foreign markets, and we advise them on risks, liquidity, regulation in different countries, and the like."
Expanding on the point of geographical reach, Carney points out that, unlike the other banks that fled Israel when times got tough, Citi stayed. "As a strategy, Citi does not leave countries. During the crisis in Egypt, we stayed, and now, with the sensitive situation in Ukraine, we haven't left. The only place I remember Citi leaving is Iraq."
(c)2014 the Globes (Tel Aviv, Israel)
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