Friday 29 Mar 2024
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This article first appeared in The Edge Malaysia Weekly on January 17, 2022 - January 23, 2022

The 1.2 times book value that the Citigroup retail banking business commanded reflects the tough business environment in that segment of banking.

Despite having limited branches, the US’ third largest banking group commanded a big influence as a retail banker. Having an account with Citibank is deemed to be prestigious. But the business was not profitable for Citigroup, hence its undemanding valuation and exit.

United Overseas Bank Ltd of Singapore staved off a challenge from other banking groups, including Standard Chartered, to acquire Citigroup’s retail banking business across four countries — Indonesia, Malaysia, Thailand and Vietnam. It is paying S$5 billion (about RM15 billion), which values the retail business at 1.2 times book value.

Citigroup appears to have got a better deal for its business in the region compared with the disposal of its retail business in South Korea in November last year, in which it had to take a loss of US$1.5 billion. The withdrawal of Citigroup from the retail banking business across 13 markets in Asia, Europe and the Middle East marks the end of its ambitions to be a global consumer bank.

It is not the first time a major financial group has taken a step back from retail banking in markets where it does not have a large presence. Last year, Mitsubishi UFG Financial Group and HSBC sold their retail banking business in the US due to intense competition. HSBC is reported to have taken a loss in the disposal.

Increasingly, the trend is for global banks to go into digital banking if they seek a presence in retail lending. Towards this end, JPMorgan Chase and Goldman Sachs have both launched digital only banks to cater for the UK retail market.

As for Malaysia, Bank Negara Malaysia is supposed to announce the winners of the five digital banking licences up for grabs around this time. The exit of Citibank augurs well for the winners of the digital banking licences.

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