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Finance

From Manila to Seoul, Citigroup ends an era of pan-Asian retail banking

US lender will prioritize Hong Kong and Singapore wealth management

Citibank headquarters in Kuala Lumpur. The U.S. bank is closing its retail business in Malaysia and a number of other countries in Asia   © Reuters

HONG KONG -- Citigroup's decision to sell most of its Asian retail business after more than a century of operations marks an end of an era for several markets.

Long after its rivals gave up on being a bank for everyone across the world, Citi under new Chief Executive Jane Fraser is following suit in exiting subscale, underperforming consumer banking operations in China, India, Thailand and seven other Asian markets as well as three elsewhere.

While the impact on the countries' banking markets will be mostly symbolic, given that their citizenry are increasingly served by local and regional players, Citi's exit removes an institution that is the largest foreign bank in a number of markets and partly dismantles one of most far-flung international networks around.

Analysts and bankers expect rivals to show interest in buying some of the businesses that Citi is exiting, such as its Australia and India units, but they expect the sale process for others could be slow.

The bank's Asia-Pacific history goes back to 1902. Citi currently employs 50,000 across 16 Asian markets and serves 17 million direct consumer clients, according to its website.

"The market impact from Citi's withdrawal is not significant," said Michael Wu, a Hong Kong-based analyst at Morningstar. "One of the most recognized banks in the world will not have a retail presence in most of Asia now, but strategically is in an expansion [mode] in wealth management and institutional business in the region."

The Asian consumer banking market has increasingly turned into a graveyard for international banks, which bet that rapid growth in the region would draw in hundreds of thousands of customers eager to tap their expertise.

However, regulators have favored local players and made it difficult for international banks to expand. Low interest rates since the global financial crisis, and increasing employee and regulatory costs, have crimped margins.

While the 13 markets "have excellent businesses, we don't have the scale we need to compete," Citi CEO Fraser said.

The bank on Tuesday said it would put up for sale its consumer franchises in Australia, Bahrain, China, India, Indonesia, South Korea, Malaysia, the Philippines, Poland, Russia, Taiwan, Thailand and Vietnam. The businesses for sale delivered $4.2 billion of the $74.3 billion in revenue Citigroup earned last year and collectively operated at a loss, the bank said in a statement.

The businesses had assets of $76 billion and a capital allocation of $7 billion.

The bank will instead concentrate on wealth management through four hubs: Singapore, Hong Kong, Dubai and London, with more than 600 relationship managers to be added in the east Asian hubs by 2025.

"We will invest to grow the integrated wealth, payments and banking businesses in our Hong Kong and Singapore hubs," said Peter Babej, Citi's CEO for Asia-Pacific. "We will also continue expanding our institutional presence. Asia is critical to our firm's strategy."

Customers are, however, bracing for some disruption and expressed disappointment by Citi's move. Take the case of Vivekh Kumar, a chemical manufacturer in the south Indian city of Madurai.

"I picked Citi's credit card as I travel internationally for business," he said. "With Citi gone, I will have to look at local card issuers, and it doesn't get me the same international service. Having said that, I have seen Citi struggle to compete in the local market in recent years."

Citi is the largest foreign bank in India, with 35 branches serving 2.9 million retail customers. It is profitable, and CEO Ashu Khullar said there will be no "immediate change to the operations."

His peer in Australia, Marc Luet, said the bank has already "received interest from several potential buyers." The bank has $9.3 billion in outstanding loans in Australia.

Citi's consumer banking operations elsewhere in the region has often not been as successful.

In China, where the bank opened an office in 1902 and was among the first international financial institutions to locally incorporate in 2007, it has a footprint across 12 cities. It has been more successful in institutional banking, however.

Koo Kyung-hoe, an analyst at SK Securities, said the lender's withdrawal from South Korean consumer banking will have a negligible impact and suggested Citi will struggle to sell the mortgage-focused business as the market is "saturated."

Citi in 2004 paid $2.7 billion to acquire KorAm Bank, which had 200 branches across South Korea then. It has since slashed the number of branches.

In Vietnam, the bank has been one of the few foreign players but it struggled to gain traction, hurt by a combination of tight regulation and differences over strategy. A similar story played out in the Philippines, where the bank set up operations 118 years ago. The lender has recently struggled to compete with local players.

Other banks have quit the Asian consumer banking market in recent years. Australia & New Zealand Banking Group sold its retail and wealth management units on the continent to DBS in 2016 after trying for a decade to succeed.

The same year, Barclays sold its private banking business in Singapore and Hong Kong to OCBC as part of a restructuring, while DBS also bought Societe Generale's Asian private bank in 2014.

Additional reporting by Lien Hoang in Ho Chi Minh City, Cliff Venzon in Manila, Kim Jaewon in Seoul and Kiran Sharma in New Delhi

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