|Anoop Roy / Mumbai March 01, 2021
Citibank of America may close its consumer banking business in India. Citibank is the largest foreign bank in terms of assets and profits in India. On 20 February, a source in the news agency Bloomberg was quoted as saying that the bank intends to sell some units in its retail banking business in the Asia-Pacific region, including South Korea, Thailand, the Philippines and Australia. Although India was not mentioned in this report, sources outside India told Business Standard that Citibank may consider expanding its retail business in India as well. Sources said Citibank may take a decision on this in the coming months.
Jem Fraser is heading Citibank from March 1. Restructuring of the bank’s international business is one of his business priorities. In an emailed reply to Business Standard, Devashish Ghosh, public affairs officer at Citi India business, said, “Our new CEO made it clear in January that the bank is reviewing its strategy with its various businesses.” We will also assess how our various businesses have aligned with each other. At the moment many options are being considered and enough time will be taken before any decision is reached.
At the moment it is unclear whether the credit card business will also be sold as part of the consumer finance business or the bank will retain it. According to sources, Citibank is not in any hurry and can consider all measures to get the maximum price. Sources said that if the bank feels that it is beneficial to remain in the credit card business, then it will not sell it.
Since Citi is not selling retail business under any pressure, there will be no shortage of buyers. An analyst tracking the banking sector in India said that if Citibank also deals with the retail business, it will not have trouble finding a buyer. Fraser will be the first woman CEO of the US-based bank. Prior to this, he had sold Citi’s banking and credit card businesses in Brazil, Argentina and Colombia while head of the bank’s business in Latin America. This week, Anand Selvakesari is going to take over as CEO of Citibank’s Global Consumer Banking. Selvakesari played a key role in advancing Citi’s credit card business in India over a decade ago as head of consumer banking.
Citibank was the second largest bank to issue credit cards in India in 2012 with a market share of 21 percent and its per-card spend was twice the average of the credit card business. Citibank’s card used to have a 30 percent share in credit card spending on e-commerce.
However, by 2020, its market share slipped to 6 percent and it slipped to the sixth position in the credit card business. It was a different matter that its credit card transactions were 1.4 times higher than the average of this business.
Citibank had 2.9 million retail customers in India in August 2020. Among them were 12 lakh bank account holders and 22 lakh credit card holders. The 119-year-old bank has 35 branches in India and employs over 19,000 employees. Most of the employees are part of CityCorp Services India Private Limited. It is an outsourcing center that helps Citibank to meet business needs in various countries.
Citibank in India is also a non-banking financial company by the name of Citicorp Finance (India) Limited. Another entity is Citigroup Global Markets India Private Limited, its investment banking unit. In the year 2013-14, Citibank merged Citifinance Consumer Finance, its entity focused on the retail business, and formed Citicorp Finance, focused on business loans.
In March 2020, Citibank’s bookkeeping had assets worth Rs 2.19 lakh crore and net profit of Rs 4,918 crore. However, the share of retail business in the bank business is steadily decreasing and the contribution of corporate lending business is increasing. The retail business’s share in Citibank’s total revenue is also declining. Retail banking accounted for 30.6 per cent of the total revenue at the end of March 2020, compared to 37.38 per cent in 2012-13 and 39.19 per cent in 2009-10.
The closure of Citibank’s retail business will further reinforce the view that the role of global banks in retail markets outside their home country is limited. Analysts have been of the view that it is not easy for them to make inroads into retail business outside their country without making a big investment on technology and innovation.
It is not easy for global banks in India to take on HDFC Bank, ICICI Bank Limited, Axis Bank, Kotak Mahindra Bank and public sector State Bank of India and Bank of Baroda. All these domestic banks are increasing their penetration rapidly and with more and more use of technology they keep connecting customers with new products.