Citi gears up for retirement from retail in Asia as offerings for consumer companies multiply

Citigroup is moving closer to its goal of downsizing retail banking in much of Asia, drawing a curtain on the Wall Street group’s ambitions to be a global consumer bank.

The US group is preparing to part ways with around 16,000 employees – a quarter of its workforce in Asia – and hundreds of thousands of customers by early next year as it reviews offers for its operations retail banking in the region.

Citi received around 40 final offers from rival banks for its retail lending business in a dozen Asian markets this month, according to two people familiar with the matter, and plans to sign deals to sell them by the second quarter. next year.

Standard Chartered and Singaporean bank DBS are among the bidders, the sources say. Standard Chartered declined to comment and DBS did not immediately respond to a request for comment.

The offers came after a six-month sales process that prolonged uncertainty for staff and customers.

Chief Executive Officer Jane Fraser had announced that consumer companies in Asia, alongside those in Eastern Europe, would be sold just five weeks after taking office in February, saying they had no “l ‘scale we need to compete “.

The divestiture will mark a culmination of the global expansion pursued by former managing director Sandy Weill in the early 2000s, whose vision of a one-stop “financial supermarket” resulted in a disjointed group of global franchises.

It’s “a decade overdue,” said Mike Mayo, banking analyst at Wells Fargo, who has long criticized Citi’s strategy.

Citi will exit its retail banking franchises in China, India, Indonesia, Korea, Malaysia, Philippines, Poland, Russia, Bahrain, Taiwan, Thailand and Vietnam as part of the sale. He struck a deal to sell the Australian business in August.

However, this is only a partial retreat. Citi will maintain operations in Hong Kong and Singapore, its largest consumer markets in the region. The group will continue to provide wealth management services to clients across the region and will maintain its institutional activities which include investment banking, corporate lending and treasury solutions.

Citi chief Jane Fraser announced consumer companies in Asia would be sold just five weeks after she took office in February © Rodrigo Capote / Bloomberg

However, there are already signs that some customers in the region have been put off by the uncertainty. Sales of investments in the Asian consumer bank plunged 36% between April, when Citi announced the planned divestments, and the end of September.

The move was also announced before Citi’s transactions team did significant preparatory work on its banks’ finances in all jurisdictions, according to two people familiar with the process. That meant interested buyers couldn’t access a “data room” containing the numbers for several months, people said.

This has signified a period of uncertainty for Citi’s consumer banking staff in Asia. “It has been a very difficult balancing act,” said one person familiar with the sale. “Some staff are upset that there hasn’t been enough communication, but there is confidential information that cannot be shared. “

A second person close to the bank said his “top priority” when considering bids for Asian units was that buyers would agree to keep “as much staff as possible.”

A senior advisor to international banks in Hong Kong said he believed the sale was announced by Citi at the start of Fraser’s tenure because it wanted to be seen as a ‘mover and stirrer’ in its early weeks. in charge.

However, one of the bank’s relatives attributed the long delay to a “complex transaction, discussing in parallel with buyers in each jurisdiction.”

Citi declined to comment on the risk to the job or the timing of the sale. He said in a statement, “We continue to sell consumer franchises with a focus on optimal results for our employees, customers and shareholders. Conversations with potential buyers continue with keen interest from a wide range of bidders.

A Citigroup office in Sydney
A Citigroup office in Sydney. The group plans to withdraw from retail banking in many markets outside the United States © Brent Lewin / Bloomberg

The pullout from Asia has been hailed by analysts and investors who have accused Citi for years of being too sprawling, as its earnings and stock prices lag behind those of rivals.

Citi is the only US mega-bank that trades below its book value. Dave Ellison, Portfolio Manager at Hennessy Funds, said: “They are just not defined as more than a big pile of assets. . . people own it because it’s cheap.

The bank has struggled to meet its main profitability targets since the financial crisis, including a tangible return on equity. This metric continued to lag its peers in the last quarter at 11%, compared to 16% at Bank of America and 22% at JPMorgan.

Citi has pruned its global franchise in search of higher returns since the global financial crisis, with Fraser’s predecessor Mike Corbat overseeing the release of its mainstream franchises in Brazil and Argentina. But the divestments proposed in Asia stand out for their scale.

The performance of the bank’s consumer activity – which is in deficit in the Asian markets it leaves and which provides meager returns elsewhere – has been a matter of internal contention for years.

Instead, Fraser is prioritizing three areas where it sees the greatest potential for growth: banking, wealth management, and commercial banking.

Citi had already slowly turned to wealth management in Asia after seeing limited demand for its standard banking services, such as cash withdrawals and checking accounts, in those markets.

Line chart showing Citi shares recovered from pandemic, but bank still lags behind rivals

In Australia, for example, it had reduced its retail network and converted its branches into fortune centers to refocus the business on high net worth clients.

In August, Citi sold its consumer business in Australia to the National Australia Bank for about A $ 1.2 billion (US $ 882 million), but this resulted in a pre-tax loss of $ 680 million for the bank. . Citi said all 800 unit staff have been transferred to NAB.

Overall, its planned outings in the region will free up about $ 7 billion in capital over several years, according to Citi, including about $ 2 billion from the liquidation of its South Korean business.

It plans to raise $ 150 billion in new assets from its wealth clients and hire 2,300 wealth managers in Asia by 2025, many of them in China.

Wall Street banks have stepped up plans to capture the $ 46 billion in savings from Chinese households over the past two years, as Beijing has gradually expanded access to its capital account. Citi was the first US bank to obtain a fund custody license in China last year.

About Virginia Ahn

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