It is the end of an era, with Citibank announcing its intention to exit the consumer banking business in India, first started back in 1985. The bank will now look for a buyer for its consumer book, including the credit cards business as part of its exit strategy, a spokesperson for Citibank India told CNBC-TV18.
Why the exit?
While announcing its first-quarter earnings for 2021, Citigroup’s global CEO Jane Fraser announced the bank’s exit from consumer banking in 13 countries including India.
“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.
India is among those 13 markets
where Citigroup has decided to exit from consumer banking. The other 12 countries include Australia, Bahrain, China, Indonesia, Korea, Malaysia, the Philippines, Poland, Russia, Taiwan, Thailand and Vietnam.
A spokesperson for Citibank India insisted the decision to exit was not linked to the bank’s financial health at all. “It is not due to stress, it is due to our global strategy,” said this person.
“When Jane visited India in early 2020 as the global consumer banking division head for the bank, we got the sense that she was pre-disposed to closing the retail business. I don’t think it was COVID-19 that did it (the exit). I think if you look at the numbers, it wasn’t so. There was that thought process that the consumer business was going to remain a drag because of the regulatory costs it was imposing everywhere, etc- that tacit understanding was there in the system. But whether they will sell the India business etc- that wasn’t there at the time,” explained an ex-Citibanker who did not wish to be named.
“The big change that happened then is the leadership change, with Stephen Bird leaving and Jane Fraser coming in in 2020. With a new CEO comes a change in strategy- this was a big driver,” added this person.
Citi says customers won’t be impacted
Citibank India serves 2.9 million retail customers, with 1.2 million bank accounts and 2.2 million credit card accounts as of March 2020. Citibank India is one of the country’s leading credit card issuer, with around 6 percent market share of retail credit card spends in the country.
A spokesperson of the bank told CNBC-TV18, “There is absolutely no impact on the customers. If a customer walks into our branch tomorrow to get a card or open an account, we will still do it.”
“Citi is the largest foreign bank in the country, it is also one of the most profitable. Its books and clients are pristine. Nothing is changing. The business will continue as usual till it finds a new home in a new buyer,” the spokesperson added.
Citibank India maintains there will not be any impact on the existing customers or its staff because of this decision.
Citi’s Cards Business
Citi, with 2.2 million credit cards, accounted for a sixth of the market share in this business and is now the sixth-largest issuer- far below its 2012 position among the top two players. “It's been part of the global strategy. We just did not invest enough in the card business, and lost share to the likes of HDFC Bank,” explained the ex-Citibanker quoted earlier.
The bank maintains that the credit cards business will function normally, with zero impact on customers. Eventually, with a sale, the customer can make a choice whether to continue with the new owner or close the account.
New Buyer for Consumer Business?
The exit would be successful if and when the bank is able to find a buyer, added the spokesperson. “No buyer has been identified yet,” said this person, saying that Citibank will first seek regulatory approvals – from the Reserve Bank of India- to start the exit process through sale of business. “If we don’t find a buyer, we may as well go back and say we are continuing with the business,” the spokesperson explained.
When Royal Bank of Scotland exited India, it had similarly sold its business to RBL Bank.
India to remain a focus market for Citi
The bank has been in India for 119 years, since 1902 when it started operations in Kolkata. It currently has 35 branches across the country and employed 19,235 people as of March 2020.
Citi’s India CEO Ashu Khullar said that the bank will continue to focus and invest in its wholesale, other businesses. “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. In the interim, we will continue to serve our clients with the same care, empathy and dedication that we do today,” Khullar said.
“Citi has been a deeply imbedded institution in India and the sharpened strategy announced today will strengthen our ability to bring the full global power of Citi to our institutional clients, reinforcing our leading positions across Corporate, Commercial and Investment Banking, Treasury and Trade Solutions, as well as Markets and Securities Services. We will continue to deliver our innovative digital solutions, backed by our global network, and devote our resources to large and mid-sized Indian corporates and multinationals, financial institutions, start-ups in the new age sectors, amongst others,” said the India CEO.
Not the first foreign bank to close India ops
From Barclays, Deutsche Bank, HSBC, Morgan Stanley, Bank of America-Merrill Lynch, RBS, Standard Chartered- all these MNCs have either shut or sold parts of their portfolios or business, cut down on strength and scale, or exited India completely. High capital requirements in India versus their parent countries, high costs of operating here have often pushed global banks to curb operations to protect profitability. Since the global financial crisis, big bulge-bracket banks have remodeled business strategies, focusing on key markets to manage their cost to income ratios.
Citibank India’s financials
Citibank operates in India as a branch of the global giant CItigroup, and has a balance sheet size of Rs 2.18 lakh crore. The other two big foreign banks in India are 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 reported a profit after Tax of Rs 4,912 crores as of March 2020, versus Rs 4,185 crores in the previous year. Citi will report its FY21 numbers only in June this year. As of FY20, its Net NPA ratio stood at 0.6 percent, vs 0.5 percent in FY19. Its CASA ratio stood at 55.8 percent, and total capital adequacy at 15.9 percent as of March 2020. Its total assets, including credit extended to Indian institutional clients from offshore Citi entities, stood at Rs 299,250 crores as on March 31, 2020. It has a deposit base of about Rs 1.57 lakh crores.
Its India business includes retail banking, wealth management, credit cards, and mortgages, investment banking and treasury and trade solutions.