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| Citibank Korea headquarters in Seoul / Courtesy of Citibank Korea |
Financial authorities vigilant at US financial giant's announcement
By Park Jae-hyuk
Citigroup officially announced its exit from consumer banking operations here, casting attention on OK, DGB and KB financial groups that have been mentioned as potential buyers of Citibank Korea's retail banking outlets.
OK runs the nation's second-largest mutual savings bank, while DGB is a Daegu-based financial group that owns Daegu Bank.
The U.S. financial giant made the announcement after releasing first-quarter earnings figures, saying it was refocusing its global consumer bank presence in Asia, Europe, the Middle East and Africa on four global wealth centers, and exiting from consumer banking operations in Korea and 12 other markets.
The announcement had been anticipated ever since foreign news outlets reported in February that Citigroup was considering divesting certain retail banking units in the Asia-Pacific region, including those in Korea.
Citibank Korea has yet to disclose a specific timeline for the restructuring, but a source familiar with the issue said the retail banking operation will be put up for sale.
Once another financial firm acquires the business, the buyer can start managing the assets of Citibank customers, as Hana Bank did after taking over Korea Exchange Bank in 2012.
OK, DGB and KB each have their reasons to consider participating in the acquisition deal, although all of them have remained cautious about making comments.
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| From left are OK Financial Group Chairman Choi Yoon, DGB Financial Group Chairman Kim Tae-oh and KB Financial Group Chairman Yoon Jong-kyoo. Courtesy of each company |
OK will be able to win a regular banking license if it acquires Citibank Korea's retail operations ― having previously taken over Citigroup Capital Korea in 2015. However, the fact that OK started its business as a private moneylender, Rush & Cash, is regarded as an unfavorable factor that may prevent the company from meeting regulatory requirements to become the largest shareholder of a bank.
DGB could use the acquisition to expand its consumer banking operations in the Seoul metropolitan area, where Citibank Korea's branches are concentrated. However, the provincial banking group may not be able to afford the takeover. The valuation of Citibank Korea's retail banking operation is estimated at around 2 trillion won ($1.8 billion), considering the bank's net assets stand at around 6.3 trillion won and the average price-to-book ratio of domestic banks of around 0.3 to 0.4.
KB is reportedly interested in Citibank Korea's wealth management division, but such a partial acquisition may not be possible unless the U.S. financial firm is willing to agree to a piecemeal sell off to different buyers, as it did when selling its Japanese operations in 2015.
Some market insiders point out that Citibank Korea is not attractive enough, considering its worsening profits and passive attitude toward new businesses, such as MyData. The bank's net profit dropped 32.8 percent year-on-year in 2020 to 187.8 billion won. In particular, its net earnings from retail banking decreased to 14.8 billion from 36.5 billion won in 2019 and 72.1 billion won in 2018.
If Citigroup fails to find a new buyer, it may have to lay off a large number of workers as HSBC did when it left the Korean retail banking market in 2013. The U.K. bank will still provide services to its current retail banking customers, without accepting new ones.
"Financial services will be provided to customers without any change or disruption until specific plans are determined, and we will exert our best efforts to minimize any inconvenience to our customers," Citibank Korea said in a statement.
The company will continue to run its corporate banking business. Citibank Korea CEO Yoo Myung-soon said her company has to transition its franchise towards further opportunities to grow the financial group's institutional franchise here.
The financial authorities vowed to monitor the progress of Citibank Korea's exit thoroughly, a day after the announcement was made by its U.S. headquarters.
"We will review necessary measures to minimize any inconvenience to customers, guarantee job stability and protect customer data," the Financial Services Commission (FSC) said in a press release.
As saturation in the domestic banking market and government regulations are seen as the "unmentioned" reasons for Citigroup's exit, the FSC emphasized that the U.S. financial firm said the decision was not based on performance or capabilities in any particular country.
Citibank Korea indicated it will disclose further details upon necessary consultation with regulators and follow any necessary procedures after discussions with various stakeholders.
