As she unveiled strong-first quarter earnings, newly installed Citigroup CEO Jane Fraser on Thursday pulled the plug on retail banking operations in 13 countries, including India and China, in order to “double down” on wealth management, a source of potentially higher growth and profits.
Citigroup said that as part of an ongoing strategic review under Fraser, the bank will exit consumer banking in 13 countries, mostly in Asia: Australia, Bahrain, China, India, Indonesia, Korea, Malaysia, the Philippines, Poland, Russia, Taiwan, Thailand and Vietnam.
However, institutional clients in these countries will still be served by Citi.
Fraser explained that Citi lacks the scale it needs to compete there.
In the first quarter, Citi’s consumer banking business in Asia generated revenues of $1.6 billion, a 9% decline from the first quarter of 2020.
Nathan Stovall, lead banking analyst, S&P Global Market Intelligence, told Forbes: “Citi decided to exit its consumer business in 13 countries because the operation simply wasn’t profitable. While the consumer operations in those markets had $82 billion in assets – roughly the size of a large regional bank in the U.S. – Citi said the businesses generated zero income last year.
Western banks HSBC and RBS have also trimmed their foreign retail banking operations in recent years due to costs and low growth.
Saul Martinez, an analyst at UBS, welcomed the development. In a research note from Thursday, Martinez wrote: “We have argued in past research that a case could be made that Citigroup’s Asia consumer businesses are sub-scale [not large enough to generate an optimal level of profitability] and might not be worth allocating capital towards.” In that earlier research note from December 2020, after meeting with Fraser, Martinez wrote: “A global franchise is good for wholesale businesses, though not retail banking.” He added that Citigroup’s global presence provides “competitive advantages” in commercial payments, corporate banking and private banking. “However, it is more difficult to be successful in retail banking outside of a bank’s home market,” Martinez added. In India, Citi has only 35 retail branches and employs about 4,000 people in its consumer banking business. In contrast, one of India’s largest domestic banks, State Bank of India, has about 24,000 branches. In Asia as a whole, at the end of 2020, Citigroup had 224 retail branches and $123.9 billion in deposits.
“Any bank should arguably consider whether to remain in a business that is not earning its cost of capital, much less one that is producing no earnings. We have seen other banks make similar decisions recently,“ said Stovall of S&P.
Fraser is one of only seven female CEOs of a major financial institution, according to BoardEx, a London-based data company. The others are Alison Rose of RBS; Carina Åkerström of Swedish bank Svenska Handelsbanken; Kjerstin Braathen of Norway’s DNB ASA bank; Margaret Keane of Synchrony Financial in the U.S.; Helena Stjernholm of Industrivarden, a major Swedish investment firm; and Adena Testa Friedman of the Nasdaq stock exchange.
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