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Let's start with Citi in the Philippines. It's been what, eight months since you completed the sale of your consumer business to Union Bank as part of a broader refresh strategy.

So now you're going to be focusing on serving institutional clients. First of all, how is the transition integration coming along?

We're all expecting it to be completed by the middle of this year. Are we on track?

Yes, Mimi. As a matter of fact, very much on track. Things have moved very smoothly.

But I must note that there were three things that we were focusing on with this transition.

We said that we will ensure that we did right by our customers, our employees, and the regulatory environment.

And I must say that we delivered well on all three of those aspects.

But most importantly for our ex-colleagues, they're very happy with the outcome. And I think they're in a very good place.

All right. Because we're talking about 1,500 or so of Citi Philippines employees who moved to Union Bank.

So how big is the team now for Citi? How many are left?

We're still around 7,000 people strong. This is one of the largest footprints for Citi globally, given that we also have a sizable service center over here.

All right. So now that you've let go of the consumer banking side, your core clients are now the institutionals, right?

The big local multinational companies. I was going over some data and saw that on the global scale, Citi Group, you guys move around all over the world.

Four trillion dollars for around 5,000 core multinational companies on a daily basis.

Whether in forex, payments, trade, essentially servicing all of their company's financial needs to operate and make payrolls and growth in their supply chains.

How big is the Philippine contribution there? I mean, how sizable is the Philippines part there?

I know that last year, this part of the business, for global at least, exploded, growing 30%. So what's the score here in the Philippine context?

Well, let me put it in terms of the number of customers or clients that we have on the ground.

In terms of multinationals, we have 950 multinationals banking with Citi, and that's banking with Citi all over the world.

On top of that, we have roughly 100 top-tier local corporates that are also banking with us.

On that note, Mimi, the strength of Citi has always been in its globality.

We are the most global bank, and from that perspective, it becomes a very obvious choice for all our global customers who want to operate anywhere around the world.

We are present on the ground in 95 jurisdictions, but now that Asia is starting to go global itself,

that is where we play a very key role in helping our local customers access the rest of the world through our network, which I just spoke of.

Do you have growth targets, at least for your local customers here in the Philippines?

What sort of growth are you looking at, and whether that growth is going to be coming from an overall growth of the pie or Citi taking market share?

Well, I'm not really at liberty to share the targets, but what I can tell you is that we are very optimistic about the opportunities that lie ahead for the Philippines.

I think we're in a very good space.

I mean, the Philippines clearly is one of the fastest-growing countries in the region, in the fastest-growing region globally.

So that speaks a lot, if you can infer from that, about what our aspirations are in terms of our growth prospects in the Philippines alone.

And it's not just on the business side, actually.

I mentioned earlier that we have one of the largest service centers for Citi globally, and we're also looking to bring in more functions into our service center.

So we're looking at growth from all directions here.

When you say you're bringing in more functions into the service center, into the service side, what sort of functions are you looking to add?

And how many people are we talking about over the next 12 months?

We don't really have the specifics just yet, but definitely we are looking to bring in more high-value functions into the country as we try to become more efficient globally.

These could be in the areas of finance or even operations.

All right. Let's talk about the bigger macro picture.

There's an expectation for a rolling recession.

You know, different parts of the world going through a recession at different times.

What does that mean for Citi specifically?

And are you starting to worry about credit more now than before?

Well, there are various perspectives on expectations of recession right now.

Citi officially right now believes that there may be a very slight recession towards the end of the year.

But we're only talking about the United States at this point.

It remains to be seen whether Asia itself will experience any form of recession given the current growth rates that we are seeing.

Which puts us, from a Philippine perspective, I think in a more comfortable space.

So, I guess, to put things simply, I am not entirely concerned about a recession going forward.

From a local perspective, I think our monetary authorities have done exceptionally well to manage things.

Right now, we are still dealing with a little bit of inflation, but it seems that things are coming under control.

And we should see something clear within the next few months.

But yes, I am not at all concerned right now of any form of recession.

And I guess, by inference, no concerns over credit.

I'm very curious, you mentioned inflation. What are you keeping a close eye on today, these days?

I mean, what does Paul Favela consider crucial leading indicators?

And whether your views are changing after what we've seen in the last two weeks?

No, no. Absolutely.

See, the problem with inflation, as I see it, is that it really is being driven largely by the geopolitical scenario.

Which means it's a global scenario. It's not specific to the Philippines.

I mean, we have our own dislocations, but it's only magnified by the fact that we have global logistical issues

that we've been dealing with since the events that happened in Europe almost a year ago, or more than a year ago.

So a lot of it will really depend on how things evolve externally, in terms of how it affects the local inflation.

Of course, we cannot ignore the fact that prices have gone up.

And we need to do whatever it is that we can do to try to, I guess, limit the impact of inflation to the local economy.

But like I said, it would seem that things are coming to an end, that inflation is peaking, if it hasn't yet.

And that gives us room to be a little bit more optimistic for succeeding months.

All right. A little bit more optimistic.

Of course, whenever we talk about inflation, the next question is central bank interest rates.

Central banks claim to be data dependent and inflation indicators are still hot.

What's your view on where rates are headed?

Because some analysts have been pointing out that the bond market seems to be pricing in too much risk,

while the equity market is pricing in too little.

Where are you?

That's a very difficult question to answer, to be very honest, because again, perspectives vary.

But if you were to ask me, and this is just my personal view,

I think rates are probably still going to move up a bit, maybe another 25 basis points from the BSP.

Of course, we are watching the Fed very closely,

because right now, it's basically the United States that's driving policy pretty much all over the world.

It can no longer be ignored.

And for that reason, we've seen the aggressive tightening done by the central bank last year,

which I think was very timely.

They were ahead of the curve.

And now, it's really up to them and the data in terms of what happens next.

We do have to keep a very close eye on events in the United States,

because that could really spell the difference between whether we're going to expect further rate hikes down the road,

or maybe the hiking cycle might just come to a pause.

And are you a believer that the BSP should keep that 100 basis point rate differential with the U.S.,

that whatever happens, that must be protected?

I don't think that the central bank is really focused on keeping a targeted differential.

Everything is relative.

And I'd like to believe that the central bank is making the decisions based on how it actually impacts the Philippine economy,

rather than just keeping to a certain level of differential in terms of interest rates.

It's a lot more complicated than that.

I must say, the transmission of interest rates into the larger economy varies in every country.

The mechanisms also vary quite substantially.

One thing we need to consider, though, is the central bank also lifted the cap on credit card rates last month,

from 24 to 36.

And not many people are talking about that.

But I think that has a more direct impact in terms of trying to rein in excessive consumption.

So it might just be that the central bank actually effectively tied it more than what people are observing.

All right.

But you're not in that business anymore, right?

No.

City Philippines.

Final question.

Everyone's talking about elevated rates.

And the common notion is that higher rates are supposed to be very good for banks because they're supposed to improve the spreads.

Is there a but there?

Is there a but there?

That's not always the case.

See, the challenge is this.

The rates could be high, but it's also a question as to whether we have clients borrowing.

And I think that's been the challenge in general for the Philippine economy.

Credit growth has not been as strong, and maybe for good reason, because that's the whole point of raising interest rates.

So it's not safe or fair to assume immediately that any hike in interest rates would immediately translate to better bottom lines for most of the banks.

For the most part, yes, it removes a lot of the compression that we have been experiencing over the last decade, I would say.

But it is definitely not a direct correlation to the bottom.

All right.

Final question.

Paul, what's 2023 going to be like for City Philippines?

What's on top of your agenda for this year?

Well, like I said, we're here to grow.

We're very excited about the prospects.

It's all going to be about growth.

It's all about leveraging the strength of the franchise.

But most importantly, it's about bringing out the best in our people.

We talk about 7,000 individuals, very talented people who have decided to join this wonderful institution.

And I guess I can say that I can vouch for that, having been here for close to 30 years.

7,000 people and maybe even counting when you do actually aggressively grow.

All right, Paul, thank you so much for joining us and congratulations on the appointment again.

Thank you very much, Mimi. Have a great day.

Thank you.