Citigroup may end its local retail banking presence

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Citigroup may end its local retail banking presence

Citibank Korea headquarters in Seoul [CITIBANK KOREA]

Citibank Korea headquarters in Seoul [CITIBANK KOREA]

Citigroup may be exiting retail banking in Korea.
 
Bloomberg is reporting that the company is considering the divestment of retail banking operations in a number of Asia-Pacific countries, including Korea, Thailand, the Philippines and Australia, citing people familiar with the matter.
 
If Citigroup pulls out from the Korean market, Citibank Korea could be up for sale.
 
The report said nothing has been decided yet.
 
A Citibank Korea spokesperson said Monday it is not something a regional office can comment on, adding it does not know anything apart from official statement from the Citigroup headquarters in New York.
 
“Our incoming CEO Jane Fraser said in January, we are undertaking a dispassionate and thorough review of our strategy, including our mix of businesses and how they fit together,” Citigroup said in statement over the weekend. “As you would expect, many different options are being considered and we will take the right amount of time before making any decisions.”
 
Citigroup has been restructuring since the 2008 global financial crisis. It has especially focused on reducing its overseas exposure.
In 2014, it announced the sale of retail units in 11 countries including Korea and Japan. Following the announcement, the group sold Citigroup 
 
Capital Korea but kept Citibank Korea.
 
Citibank Korea has been reducing its retail banking business since 2017.
 
It cut the number of physical branches from 133 in 2016 to 44 in 2017. This year, 39 offline branches are operating.
 
As online and mobile banking become more popular, it had decided to cut down on offline branches and save on costs. The bank has focused on strengthening its wealth management and corporate financing businesses.
 
CEO Yoo Myung-soon, who was inaugurated in October last year, has said the bank has been investing to improve wealth management, corporate finance and digital financing services to differentiate its offerings from those of other banks.
 
It is not only Citibank Korea rethinking retail banking.
 
All banks in Korea are struggling with retail banking due largely to low interest rates and growing demand for digital banking.
 
Low interest rates have pulled down the net interest margin, which is net interest income banks earn from credit products.
 
KB Kookmin Bank’s net interest margin fell by 0.16 percentage points from 1.67 percent in 2019 to 1.51 percent last year.
 
As people increasingly move online for banking, fewer customers are visiting offline branches. This has left traditional banks wondering what to do with expensive physical branches as there are still customers in need of offline services.
 
U.S. asset manager Ark Invest said in its “Bad Ideas Report” last October that physical bank branches should be avoided as the traditional banking industry is at risk of facing disruption.
 
“While it is costly for [traditional banks] to keep physical branches for retail banking, competition is growing fierce with newly emerging competitors like internet-only banks that have low-cost structures,” said Suh Jeong-ho, a senior research fellow at Korea Institute of Finance. “As it has become more difficult to make profit from existing business structures, banks will keep on trying to find breakthroughs by focusing on wealth management and corporate finance.”
 
Banks overall are reducing branch numbers.
 
The number of physical bank branches in Korea decreased from 7,281 in 2015 to 6,406 in 2020.
 
Existing offline branches are being reformed to offer specialized wealth management services.  
 
“To keep in touch with customers and to cooperate with [demands] from the country’s financial regulators, it is hard to quickly turn all bank branches to focus on wealth management,” a source from the local banking industry said. “But as far as I know, Citibank Korea has mostly completed shifting its physical branches to focus on wealth management.”  
 
 
BY AHN HYO-SUNG, KIM JEE-HEE   [kim.jeehee@joongang.co.kr]
 
 
 
 
 
 
 
 
 
 
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