Citi looks to enhance competitiveness with shift in focus to wealth management in Asia, says GlobalData

Following the news that Citigroup has decided to exit consumer banking operations in 13 markets across Asia, Europe and the Middle East; 

Parth Vala, Analyst at GlobalData, a leading data and analytics company, offers his views:                                    

“Due to lack of scale and resources to compete and channelize available resources to more high return wealth management space, Citigroup has decided to exit from consumer banking business in 13 markets including Australia, Bahrain, China, India, Indonesia, South Korea, Malaysia, the Philippines, Poland, Russia, Taiwan, Thailand and Vietnam. However, it will continue retail banking activities in Asia and EMEA from centers such as Singapore, Hong Kong, the UAE and the UK.

“Majority of the markets constitute the group’s Asia Global Consumer Banking Business segment (Asia GCB). The exit seems to be a long-time coming as over the last five years, retail banking revenue has been witnessing a flat growth with compounded annual growth rate (CAGR) of -0.01% from US$4,270m in 2016 to US$4,268m in 2020. In terms of profitability also, the business posted subdued CAGR of about 3% from US$652m in 2016 to US$735m in 2020 with high-cost structure of about 70%.

“In addition, the latest Q1 2021 results also were not encouraging as Asia GCB reported 9% decline in revenue over Q1 2020 on account of decline in revenue from card business and lower spreads in deposits.

“On the other hand, the group’s Asian Institutional Clients business, which provides wealth management and markets related services was much more dynamic. The business posted a CAGR of 7.6% in revenue over the past five years with profit margin up from 31.4% in 2016 to 38.3% in 2020.

“With increased focus on wealth management through re-channelizing of consumer banking resources, Citigroup could further enhance its competitiveness and profit margin in its wealth management and market related services businesses.”

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