Citigroup announces retail business exit from Bahrain, India, Philippines, 10 other countries

Business Standard | Mumbai

The Daily Tribune – www.newsofbahrain.com

Citigroup on Thursday said that it was exiting its retail business in India and 12 other countries across Asia and parts of Europe, to focus on wealth management business, as it lacked the scale to compete in the retail space.

Business Standard had reported on March 1 that the largest foreign bank in India, having a presence here for nearly 120 years, was en route to exit its retail business in the country.

The decision to exit retail businesses from a few markets was one of the first decisions by newly appointed CEO Jane Fraser after she took over the US-headquartered bank in February.

On Thursday, Citigroup said it would exit from its consumer franchises in India, Australia, Bahrain, China, Indonesia, Korea, Malaysia, Philippines, Poland, Russia, Taiwan, Thailand and Vietnam, the bank said while announcing its quarterly results.

Citigroup’s Institutional Clients Group will continue to serve clients in these markets, which remain important to Citi’s global network, the bank said in its statement.

The exit is part of its ongoing strategic review, in order to direct “investments and resources to the businesses where it has the greatest scale and growth potential.” Citi will now focus its Global Consumer Bank presence on four wealth centres — Singapore, Hong Kong, the UAE and London.

“While the other 13 markets have excellent businesses, we don’t have the scale we need to compete,” Citi CEO Fraser said.

“We believe our capital, investment dollars and other resources are better deployed against higher returning opportunities in wealth management and our institutional businesses in Asia,” she said.

The bank will now “double down on wealth,” Fraser said.

Citigroup reported a profit of $7.94 billion, or $3.62 a share, exceeding analysts’ estimate of $2.60 a share, according to Bloomberg.

Fraser’s admission that it lacked the scale for competing in markets such as India is something that analysts have flagged before. In India, competition has heated up with competition from the likes of HDFC Bank, ICICI Bank, Axis Bank, Kotak Mahindra Bank and large public sector banks such as State Bank of India and Bank of Baroda which are nimble-footed and technology-savvy and are continuously innovating on the retail turf with newer products for customer acquisition.

Citi’s retail exit is also in sync with other foreign banks that have closed down businesses here.

Over the past few years, StanChart has sold its asset management company and closed down its institutional cash equities, equity research, and equity capital markets; JPMorgan has surrendered its NBFC licence; BNP Paribas has shut down its wealth management business; Deutsche Bank has sold its credit card business to IndusInd Bank, and HSBC has closed down its private banking business and some of its branches.

British bank Barclays Bank and South African FirstRand Bank have buried their retail dream on Indian soil. On the other hand, the Indian subsidiary of DBS of Singapore acquired Lakshmi Vilas Bank.

Citibank in India was also slowly increasing its weight towards wealth management business while lowering its dependence on the retail business.

Retail banking contributed 30.6 per cent to revenue at the end of March 2020, against 37.38 per cent in 2012-13 and nearly 39.19 per cent in 2009-10.

Ten years ago, India had been among the first 15 markets for the US bank; by the last decade, it rose in ranking among the top four markets, largely on the strength of corporate banking.

In 2012, with a 21 per cent market share, Citibank was the No. 2 credit card issuer in India, while expenditure per card was double the industry average; it also had a 30 per cent share in e-commerce spend. By 2020, its market share slipped to around 6 per cent and the position to sixth even though average card spend remained 1.4x higher than the industry mean.

In August 2020, Citibank in India served 2.9 million retail customers with 1.2 million bank accounts and 2.2 million credit card accounts. The 119-year-old bank has 35 branches and employs over 20,000 people. The bulk of the employees are part of Citicorp Services India, an outsourcing centre that caters to different geographies of the US bank.

In March 2020, Citi had Rs 2.19 trillion assets on its balance sheet and made a net profit of Rs 4,918 crore. Its gross bad loans were 1.43 per cent of the loan book and, after provisioning, net bad loans were 0.56 per cent.

Its closest peer, Hongkong and Shanghai Banking Corporation (HSBC) India, posted a net profit of Rs 2,778 crore on an asset book of Rs 2.11 trillion. The bank’s bad loans were lower than those of Citi.