Thought Behind Citibank Exit from Consumer Business


Covid-19 has changed consumer behaviour, attitudes and impacted the purchasing trends as well. 

Banks have to find their priorities and steps to reposition themselves as a survivor for the future. A big challenge for them is to manage revenue and customer expectation despite near-zero interest rates and growing goad on consumers. 

Amidst the pandemic, the US banking major Citigroup has decided on exiting the consumer banking business (comprising of credit cards, retail banking, home loans and wealth management) after more than 3 decades in 13 countries (including India, Australia, Bahrain, China, Indonesia, Korea, Malaysia, Philippines, Poland, Russia, Taiwan, Thailand, and Vietnam) as a global strategy to focus on institutional business. Although they will continue to focus on global consumer bank presence across Singapore, Hong Kong, the UAE, and London.

How Big was Citibank’s Business in India?

Citibank started in 1902 and had a substantial scale in India by gradually serving 2.9 million retail customers with 1.2 million bank accounts. They cater to about a 6 per cent market share of retail credit card spends in the country with 2.2 million credit card accounts. Citibank has 35 branches in India as of the year ended March 2020, advances aggregating to Rs. 66,507 crore and deposits worth Rs. 157,869 crores. As of March 31, 2020, total assets, including credit extended to Indian institutional clients from offshore Citi entities worth Rs. 299,250 crores. The bank reported a profit of Rs 4,918 crore (net profit on exchange transaction of Rs. 2334 crore in FY’2020 and income of Rs. 1727 crore in commission, exchange, and brokerage during the year.)

Many believe the stressed-out profits of the consumer banking business, increasing demand for capital and staggered “glocalization” of the business as main reasons for the exit. India has also opened up to multiple layers of institutions such as payment banks, small finance banks and recently digital lenders making the retail banking industry highly competitive. Also, the intensively localised strategy became a big disadvantage for the foreign banks compared to the Indian banks. 

The RBI has also been insisting on foreign banks to incorporate locally through the subsidiary model to get near-national treatment, but not many have adopted this route. Even Citi financial (their NBFC arm) which did well initially has taken a huge hit during  the post-crisis period. Looking forward, as the Citi’s India CEO states-“Citi has been a deeply embedded institution in India and the sharpened strategy announced today will strengthen our ability to bring the full global power of Citi to our institutional clients, reinforcing our leading positions across corporate, commercial and investment banking, treasury and trade solutions, as well as markets and securities services”, the management has concluded exiting its consumer banking business.

What is the Future of  Consumer Business of Citibank?

The focus will now shift towards their corporate book. The stipulations of the RBI would be something to wait and watch for them to sustain as a fully licenced bank in India. This step can also mean that foreign banks such as Standard Chartered Bank and HSBC will grow stronger and will try to consolidate their position as foreign banks in India.

Opportunities will arise for smaller banks- both Indian and foreign- who want to scale up their retail business and it is expected that NBFCs that are looking to expand their business in India would benefit from this. Eyes are also on DBS India which recently acquired Lakshmi Vilas Bank and with fantastic assets of Citibank, there are high chances that DBS India will also try to leverage this opportunity with its advantage of strong digital footprint. 

Citi’s credit card business will be the most sought-after vertical according to the management and they believe it should get them premium valuation. There will be many suitors, especially the Indian private banks like Kotak Bank, ICICI Bank, and Axis Bank who would be aggressive in acquiring the credit card business. 

Market share of credit card spending, Dec 2020 Source: RBI

Impact on Bank Account Holders?

In the short term, the bank has stated that there will be no change in the bank’s operations and will focus on dedicated service to their clients. They made it clear that they will not be closing down the business in India and they plan to sell off the business which means that the account holders would be serviced by the acquirer once the sales conclude. Citigold clients (most premium customers of the bank) are also assured that international requirements would be taken care of by the bank while entering into a deal with the acquirer in India.