CitiBank recently announced the withdrawal of its retail business in 13 countries in Asia, Europe, the Middle East, North Africa and other consumer markets, including Taiwan and China. The news has shocked the international community and taken consumers by surprise.
The new Citi CEO, Jane Fraser, is now a member of the board. Jane Fraser, the new Citi CEO, said when announcing the news that Citi has a great opportunity to serve consumers during the epidemic, but we must also think about our customers, how we should do to meet their needs for financial services, provide the best service to the people, and also think about the communities affected by the epidemic, and how we should give support.
Fraser took office in March this year, and is the first female figure to head a large U.S. banking group. The new Citi CEO Fraser took office at the beginning of the year, after readjusting the group’s global development strategy, plans to exit the retail business in 13 countries including China, Taiwan, India and other consumer finance markets located in Asia, Europe, the Middle East and North Africa. For example, the consumer finance business in Taiwan will be disposed of, and in Asia, only Hong Kong and Singapore will be retained. The new CEO pointed out that because it is a global strategy, it has nothing to do with the profitability of the business in Taiwan and China.
Citi is the third largest bank in the U.S., and its net profit in the first quarter showed an increase to 3 times of profitability. Now it has to give up some business markets. The Echo points out that Citi has to reduce the bank’s reserves due to the New Coronavirus pandemic, so it is giving up its consumer business in 13 countries.
Citigroup, a major bank in international markets, has cut its expenses significantly after nearly going bankrupt in the middle of the decade because of the financial crisis, the Echo notes. In particular, it has withdrawn from certain Latin American countries in 2015. With these latest announcements, Citigroup will soon no longer have branches operating in the retail sector, except in six countries, where it had 50 branches worldwide in 2006.
In addition to China, Taiwan and India, Citigroup plans to terminate its bank’s retail operations in countries such as: Australia, Bahrain, Indonesia, South Korea, Malaysia, Philippines, Poland, Russia, Thailand and Vietnam, where the majority of these related 200 Citi branches will be sold.
According to McKinsey, the world’s leading management consulting firm, Citigroup’s divestment from countries such as China or India shows that it is very difficult for foreign banks to compete with local banks in their home countries to gain a foothold in these retail consumer banking markets. The intense competition with local banks in the financial customer service retail space and the effort required to attract top local talent has further complicated the job of some of the international giant banks. And at the capital and regulatory levels, again, it is costing them dearly. As a result, by 2020, Citi’s share of the bank’s operations in its international division falls to 1.2% in China and 6.8% in India; compared to 1.8% in China and 7.2% in India a decade ago.
As for the impact on Taiwan’s business, financial sources pointed out that Citibank only disposed of the consumer business this time, including credit cards, credit, mortgages, car loans, ATMs, safe deposit boxes,, as well as its local branches. As for the corporate and corporate customer business still remain. In Taiwan, Citi may retain only one branch in the future. Just like the model of ANZ Taipei branch of AXA Bank. If we follow the previous experience of AXA in disposing of its consumer banking business, including branches and ATMs, all of Citi’s 45 branches in Taiwan will be sold.
After Citi withdraws from the consumer banking market, can people not pay their loans and card debts? No! If you owe money, you still have to pay it back.
In addition, Citi will still have corporate finance business in Taiwan in the future, and people’s credit will also be written down. Until Citi finds a new buyer, its existing customers, as well as the rights and interests of Citi’s existing employees, will remain unchanged.
Taiwan’s Financial Supervisory Commission (FSC), which regulates the banking industry, respects Citi’s commercial considerations for the sale of its consumer finance business, but also puts forward three major requirements: 1) the new buyer must be a Taiwanese banker 2) ensure the rights and interests: Citi must communicate clearly to its customers and employees to ensure the rights and interests of customers and employees 3) prohibit the referral of business, such as the referral of Taiwan customers’ business to Hong Kong or Singapore, otherwise there will be no protection if customers have problems in Hong Kong If there is a problem with the transaction, there will be no protection.
Overall, Citigroup reported a net profit of $7.9 billion for the first quarter of the year, beating what analysts had expected. In particular, its investment banking segment saw a 46% jump in revenue. Conversely, its retail banking business in consumer finance dwarfed a 14% decline, which put pressure on its total net banking revenue, which fell 7% overall to $19.3 billion.
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