Categories: Business Education

As Citi exits India retail biz, foreign banks, card-companies may explore M&A

By Sanjeev Sharma

New Delhi, April 16 (SocialNews.XYZ)

In India, Citi had $4.1 billion of retail assets that formed 1.5% of total and a good 6% share in credit card spends and presence in retail deposits, loans & fees.

Private banks, card-companies and foreign banks might gain share or may be interested in exploring M&A, as per a report by Jefferies.

Citi highlighted sub-scale operations as key reason to exit consumer banking in Asia/ EMEA. Citi's CEO Jane Fraser highlighted plans to exit from retail banking operations from 13 Asian and EMEA markets.

The business in these markets is profitable, but sub-scale operations limits ROE for the market and the parent.

The report notes that exits could include a gamut of segments like credit-cards, deposit accounts, retail loans and other retail operations (like bancassurance, etc.). In these markets, Citi will continue to focus on commercial, corporate and strengthen presence in wealth management. Detailed plans/ timelines for exits will be shared later.

As per the report, Citi's presence in India is through branch operation (of the global bank) and the country has $ 29 billion in balance sheet assets and another $135 billion in off-balance sheet business (derivative business) as on March 2020.

In the retail segment, Citi in India has $4.1 billion in assets that form 1.5% of total. In India's retail segment, Citi has built stronger presence in credit cards where it has 6% share in total spends and it also has presence in housing loans (40% of retail loan exposures) and its market share in savings deposits at 1.5% is much higher than its market share in branches/ debit card clients.

In FY20, it had reported profit of $658 million in India and segmental reporting shows that retail formed 14% of total pretax profit (ex unallocated exp). Asset quality has been stable with overall gross NPL ratio in Dec-20 at 1% for India and retail 90-day delinquency at 1.9%.

The exit from retail business in India may open opportunities for Indian private banks, credit-card players & foreign banks in India.

The report said that Citi's exit from India (form and timing awaited) will be an opportunity for players in India to either acquire the existing stock of clients and/ or gain market share in segments like credit cards, deposits and retail loans.

Private banks and credit card companies like SBI Cards can be key beneficiaries of market share gains in the credit card segment. Some smaller private banks might be interested buyers of the India portfolio as they are looking to scale up in the segment. Foreign banks might also look to expand presence, and we note that DBS had recently acquired branches of Indian Bank (LVB) to expand presence in India - other large foreign banks in India are HSBC and StanChart, the report said.

In a global restructuring to allocate resources in markets with scale, Citigroup will exit consumer banking business in India and thirteen other countries.

Citigroup announced strategic actions in Global Consumer Banking - as part of an ongoing strategic review - which will allow Citi to direct investments and resources to the businesses where it has the greatest scale and growth potential. The announcement was made as Citigroup reported first quarter results.

Citi will focus its Global Consumer Bank presence in Asia and EMEA on four wealth centers - Singapore, Hong Kong, the UAE and London. As a result, Citi intends to pursue exits from its consumer franchises in thirteen markets across the two regions.

The affected businesses include the consumer franchises in India, Australia, Bahrain, China, Indonesia, Korea, Malaysia, the Philippines, Poland, Russia, Taiwan, Thailand and Vietnam. Citigroup's Institutional Clients Group will continue to serve clients in these markets, which remain important to Citi's global network.

Jane Fraser, Citi CEO, said, "As a result of the ongoing refresh of our strategy, we have decided that we are going to double down on wealth. We will operate our consumer banking franchise in Asia and EMEA solely from four wealth centers, Singapore, Hong Kong, UAE and London. This positions us to capture the strong growth and attractive returns the wealth management business offers through these important hubs.

"While the other 13 markets have excellent businesses, we don't have the scale we need to compete. 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. We will continue to update you on strategic decisions as we make them while we work to increase the returns we deliver to our shareholders," Fraser said.

(Sanjeev Sharma can be reached at Sanjeev.s@ians.in)

Source: IANS

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