Citi group while announcing its quarterly results on Thursday said that it will exit its consumer franchises in 13 countries. This includes India along with other countries like Australia, Bahrain, China, Indonesia, Korea, Malaysia, Philippines, Poland, Russia, Taiwan, Thailand, and Vietnam.
It will focus its global consumer business in four markets- Singapore, Hong Kong, London and the UAE.
Citi Bank India has 35 branches. Its commercial banking segment servers over 3,000 clients.
The US banking major, as part of a global strategy to focus on institutional business, decided to exit from the consumer banking business in India. The bank is going to continue its wealth management and institutional business in India. The Bank has also decided not to initiate any layoffs or closure of offices in India.
Citi Bank believes that the new strategy will strengthen its ability to bring the full global power to its institutional clients. It could have a great impact across corporate, commercial and investment banking, treasury and trading solutions, markets, and securities services.
The reason for discontinuing its retail operations could be its profits are under a stress needing more capital to run the business. Or that foreign banks are at a disadvantage because of the competition they are facing from India’s retail banking industry.
Citi Bank’s contribution and its position in India: Citi banks was not a money-spinner, but it had invested quite remarkably over the years. It was one of the first banks to launch SMS banking, phone banking, internet banking and credit card business in our country.
Citi bank has a loyal customer base, and it was a pioneer in giving the ‘foreign bank’ experience to them followed by others. Its rivals like HSBC and Standard Chartered have been major players as foreign banks but Citi bank made its own mark due to the pioneering of some the customer segment services. By setting up Citicorp Overseas Software Ltd and Iflex Solutions Ltd, Citi bank helped in building the foundation of the Indian software industry.
In Fiscal 2019-20(FY20), Citi marked a profit of Rs.4918 crore in India. Retail segment formed 14% of the total pre-tax profit.
Citi Bank started its operations here in 1902 and serves 2.9 million retail customers with 1.2 million bank accounts. It has 2.2 million credit card accounts with approximately 6 percent market share of retail credit card spends in India.
The Bank earned income of Rs.1727 crore by way of commissions and its profit on exchange transactions is Rs.2334 crore in FY’20. The bank had advances summing up to Rs. 66,507 crore and deposits worth Rs. 1,56,869 crores.
As on 31st March,2020 the Citi franchise (India)’s total aggregate assets including credit extended to Indian institutional clients from offshore Citi entities stood at Rs. 2,99,250 crores.
Position of the account holders:
Citi bank is going to continue serving its customers and is not going to close the consumer business in India. Just that it has plans to sell off the business and the acquirer will serve its customers. There shall not be any change in the bank’s operations and the customers shall be served with the same care and dedication without any change. The acquirer might continue serving the Citi gold clients for their international requirements too if the deal provides for the same.
Probable acquirers
Potential acquirers could be foreign banks wanting to enter India but according to bankers, many Indian mid-sized banks will be interested in buying Citi Bank’s consumer business due to its scale. The buyer could have a tough time getting the license and it must fit the criteria of the RBI as well. There are also probabilities that different segments are taken up by different interested parties according to independent valuation of each of the segments.
Citi bank has high quality SOPs, trained staff, and product development capabilities as well as its credit programme is a valuable proposition for the acquirer.
Smrutirekha Bhoi