NEW DELHI: American banking major Citigroup is slimming down its sprawling consumer operations as part of a broader strategic review under new chief executive officer Jane Fraser to focus on wealth management business since it lacks the scale to compete in the retail space. On Thursday, the third largest bank in the US said it will exit retail banking operations in 13 countries across Asia and parts of Europe, which includes India and China, Australia, Bahrain, Indonesia, Korea, Malaysia, Philippines, Poland, Russia, Taiwan, Thailand and Vietnam.
“As a result of the ongoing refresh of our strategy, we have decided that we are going to double down on wealth. While the 13 markets have excellent businesses, we don't have the scale we need to compete," Fraser said, while announcing its quarterly results. Citigroup will now operate its global consumer banking business solely from four markets: Singapore, Hong Kong, London and the UAE. It will, however, continue its corporate and institutional banking business in the markets where it is ending consumer operations and in India, it will continue to focus on offshoring or global business support rendered from centres in Mumbai, Pune, Bengaluru, Chennai and Gurugram.
“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,” Fraser added.
Citi’s decision to exit the consumer banking business in India, where it started way back in 1985 to become the largest foreign bank, marks the end of an era. But, it may be noted that Citi is not closing down its consumer business here. The business will only change hands after it gets the requisite regulatory approvals and finds a strategic buyer. Till the time of sale, the bank said there will not be any impact on the existing customers and its 21,000 employees.
“India is a strategic talent hub for Citi. We will continue to tap into the rich talent pool available here to continue to grow our five Citi Solution Centers which support our global footprint. There is no immediate change to our operations and no immediate impact to our colleagues as a result of this announcement,” said Ashu Khullar, CEO Citi India.
Citi had entered India in 1902 and its business here comprises credit cards, retail banking, home loans and wealth management. Spread across 35 branches, Citibank India has around 29 lakh retail customers, 12 lakh bank accounts and about 22 lakh credit card accounts as of March 2020. The bank holds around six per cent share in credit card spends and 5.9 per cent market share in digital payments. CitiBank India a balance sheet size of Rs. 2.18 lakh crore, and is followed by HSBC with a balance sheet size of Rs 2.11 lakh crore and Standard Chartered with Rs 1.84 lakh crore in 2019-20. The bank had a 15.4 per cent market share in loans among all foreign banks in India in FY20. On the financial front, Citi had outstanding loans of ₹67,101 crore as of March 2020 in the country. Its total deposits stood at ₹1.57 trillion as of 31 March 2020, including deposits from customers and other banks. Of this, savings bank deposits were at ₹31,730 crore in FY20. About 26 per cent of the foreign portfolio investment comes through Citibank India.
Citi’s retail exit is in sync with the trend of full or part exit of foreign banks since 2009 as high capital and regulatory requirements in India have pushed them to retreat into their domestic markets to save on costs and protect profitability. UK-based Barclays, Deutsche Bank, BNP Paribas, HSBC and Standard Chartered have curbed their operations in India, while UBS, JPMorgan, ING and Goldman Sachs have surrendered their banking licenses indicating that home banking and not the concept of global banking is being focused upon.
At the same time, local lenders --- HDFC Bank, ICICI Bank, Axis Bank, Kotak Mahindra Bank and large public sector banks such as State Bank of India and Bank of Baroda --- have been able to step up to the challenge by improving ability to raise dollar-denominated funds, grow more rapidly than foreign peers aided by an active policy of branch licensing, incorporating the latest evolvements in robotics and Artificial Intelligence (AI) and meeting demands of consumers cross the length and breadth of the country in an intensely competitive market.
Also, foreign banks do not find small ticket retail banking in India commercially attractive, a reason why they chose to exit at a time when domestic rivals are in a race to get more retail customers into their fold. Retail loans may take over as the largest segment in overall bank credit during 2020-21. With Rs. 27.74 lakh crore outstanding as of February, the segment, comprising home, auto and personal loans besides others, has already dethroned the services sector (outstanding Rs 26.6 lakh crore) and is trailing behind the industrial segment, which has a narrow lead (outstanding Rs 27.86 lakh crore).