US banking giant Citigroup, a leading foreign bank, on Thursday decided to exit the consumer banking business in India as part of a global strategy to focus on institutional business. Citibank India has now put on sale its retail banking business that includes advances totalling Rs 66,507 crore and deposits worth Rs 1,57,869 crore.
The US giant will not sell its wealth management and institutional business which earns the bank major fee income. It will sell off the retail accounts and credit cards, and indicated that there won’t be any layoffs or closure of offices in India. Citibank India, which began operations here in 1902, serves 2.9 million retail customers, with 1.2 million bank accounts and 2.2 million credit card accounts, and nearly 6 per cent market share of retail credit card spends in the nation. It popularised the concept of credit cards and ATMs in India in the ’80s.
Citigroup global CEO Jane Fraser said Thursday the bank will exit 13 international consumer banking markets, including India and China, shifting its focus to wealth management and away from retail banking in places where it is small. Citigroup will focus its global consumer banking business in four markets: Singapore, Hong Kong, London and the UAE.
Ashu Khullar, CEO, Citi India, said, “There is no immediate change to our operations and no immediate impact to our colleagues as a result of this announcement. In the interim, we will continue to serve our clients with the same care, empathy and dedication that we do today.” For the Citi franchise in India (Citi) in aggregate, total assets, including credit extended to Indian institutional clients from offshore Citi entities, as on March 31, 2020, was Rs 2,99,250 crore.
“Citi is not closing down consumer business in India. However, the plan is to sell off this business. There won’t be any retrenchment or closure of offices. We will focus on the institutional business,” said an official of the bank.
While scaling up the consumer banking business has been an issue, profits were not an issue for the bank as it reported a net profit of Rs 4,918 crore in the year ended March 2020. The bulk of the profit, however, came from the bank’s other income. While its profit on exchange transactions stood at a net of Rs 2,334 crore in FY20, the bank earned income of Rs 1,727 crore in commission, exchange and brokerage during the year.
As for the big question of who will buy the bank’s retail business, industry insiders point towards various models. Many feel that since it will be tough to find a big buyer who will acquire the license in current times, the new buyer will also have to clear the fit and proper criteria of the Reserve Bank of India. The more feasible option seems to be ‘Sum of the Parts’ valuation approach where business segments would be valued independently and taken up by interested parties. So, if some bank is interested in Citi’s mortgage business, it can go for that and someone who is interested in the card business, can go for that.
“Potential acquirers may be foreign banks wanting to enter India. Another option could be to strategically sell branch banking business to an existing bank in India,” said Srinath Sridharan, senior BFSI leader and independent markets commentator.