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Citibank to exit retail banking in India under global plan


Citibank will shut its India retail banking business — including credit cards, savings bank accounts and personal loans — as part of a global decision to exit 13 markets, as the US-based lender focuses on a few wealthy regions around the world.

Citi started retail operations in India in 1985 and was among the pioneers of credit cards. It will focus on corporate and institutional banking in the country as part of a strategic rethink, chief executive Jane Fraser said in a press statement after the bank announced its 2020 results.

Citibank will exit consumer operations in Australia, Bahrain, China, India, Indonesia, South Korea, Malaysia, the Philippines, Poland, Russia, Taiwan, Thailand and Vietnam. Fraser said the plan is to concentrate on consumer banking in four wealthy markets — Singapore, Hong Kong, the UAE and London — apart from the US. “As a result of the ongoing refresh of our strategy, we have decided that we are going to double down on wealth,” Fraser said in the release.

Rs 2.99-lakh crore India Assets

The move to focus on the remaining markets “positions us to capture the strong growth and attractive returns the wealth management business offers through these important hubs,” said CEO Fraser.

Citi’s total assets in India at the end of FY20, including credit extended to Indian institutional clients from offshore Citi entities, stood at Rs 2.99 lakh crore.

“There is no immediate change to our operations and no immediate impact to our colleagues as a result of this announcement,” said India chief executive Ashu Khullar.

“The consumer banking business, which includes cards and loans against property, would be around Rs 32,000 crore,” said a person with knowledge of the bank’s activities in India. “They also have a huge amount of savings accounts built over the last few years, which have a lucrative liability book, and credit cards, (in) which they were the largest among foreign banks in India.”

The bank had Rs 27,911 crore of loans to agriculture, affordable housing, renewable energy and micro, small and medium enterprises. Of this, Rs 4,975 crore was to weaker sections, as part of Citi India’s priority sector lending obligations, results released last year showed.

Outstanding credit cards as of February stood at 2.65 million, the most among foreign banks in India, ahead of 1.46 million by Standard Chartered and 1.56 million by Amex.

‘India a Talent Hub’

Citi employed 19,235 people as of March 2020, a large chunk of them in retail banking. It’s unclear how many of those jobs will be lost. Citi, like its foreign banking peers, also has service centres in India under Citicorp Services India Pvt Ltd, which employ 13,964 professionals across five locations.

Khullar said the change in strategy will help Citi strengthen its ability to service large corporate and institutional clients. “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, startups in the new-age sectors, amongst others,” he said in a statement. “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 centres, which support our global footprint.”

At the end of March 2020, Citibank served 2.9 million retail customers with 1.2 million bank accounts and 2.2 million credit card accounts. It claimed a 6% market share of retail credit card spends in the country. The average spend per card was 1.4 times higher than the industry average, making it a profitable business for the bank in India. It also has the largest wealth management business among foreign banks, which is also likely to be put on the block as part of the new strategy.

Pandemic-Based Rethink

Citi’s decision to exit the markets follows the accelerated disruption caused by the pandemic, which has forced large banks to refocus management bandwidth and capital across the globe, said Piyush Singh, growth lead, Asia Pacific and Latin America, Accenture.

“If you want to be in retail in India, you have to be all in or not be there at all,” he said. “The disruption caused by Covid-19 has forced everyone to realign their strategy because not everyone can build a localised retail model, especially in India, where phygital is the way to go, but there is tough competition from new lenders like IDFC First and Bandhan and also small finance banks.”

Citibank could sell its retail business in parts or as a whole, with possible suitors ranging from local lenders such as Kotak Mahindra, Axis Bank and IDFC First to foreign ones like DBS Bank.

DBS Bank is considered a strong contender, given its deep pockets and ambitions to expand in India. In November last year, the Singaporean lender completed a Reserve Bank of India-directed acquisition of distressed Chennai-based Lakshmi Vilas Bank (LVB), the first such rescue in the country.

Though relatively new to India, it has already infused more than $1 billion. LVB has given it access to south India but it may look at Citi’s credit card portfolio to kickstart business in India. DBS does not offer credit cards in the country currently.

Results released in August 2020 showed Citibank made a net profit of Rs 4,912 crore in India in the year ended March 2020, up 17% from Rs 4,185 crore a year. Net non-performing assets inched up to 0.60%, from 0.50% in March 2019. The CASA (current and savings accounts) ratio dropped to 55.8% in March 2020, from 60.3%, while capital adequacy ratio dropped to 15.90%, from 16.50% a year earlier. The bank held a 5.87% market share in digital payments and 8.25% of India’s merchandise and software services trade flows as of March 2020.

Local lenders have profited from the exit of foreign banks over the past decade. IndusInd Bank, for example, bought Deutsche Bank’s credit card portfolio in 2011 and followed it up by acquiring Royal Bank of Scotland’s diamond financing business in 2015. Another private sector lender, RBL Bank, started its credit card business by purchasing the portfolio from RBS in 2013.



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