Lee Min-hyung joined The Korea Times in 2014 and has worked as a journalist mainly in Korea’s finance, tech and automotive industry. He specializes in content creation, breaking news and in-depth analysis currently on transportation and mobility. You can reach him via mhlee@koreatimes.co.kr.
Citibank Korea may pursue divisional sales
Citibank's logo is displayed at the headquarters of Citibank Korea in Seoul in this file photo. Yonhap
By Lee Min-hyung
By Lee Min-hyung
Citibank Korea CEO Yoo Myung-soon
As chances are low for Citibank Korea to find an optimal sole investor to acquire its retail banking business, which is now up for sale at a relatively high sale price, the lender may pursue divisional sales of its retail banking unit, industry sources said, Thursday.
Citibank Korea held a second board meeting Thursday to discuss its renewed exit strategy by scrapping its earlier plan to sell its retail banking business as a whole and find separate buyers for individual units.
The lender is known to have discussed this plan B during the hours-long meeting. The firm's estimated sales price is around 2 trillion won ($1.79 billion), which is widely seen as “quite high” according to industry officials. The most probable scenario is for the lender to push for divisional sales of its retail businesses ― such as its wealth management unit or credit card business, they said.
“Citibank Korea is widely expected to change its exit strategy and appears to start pushing for the second option of selling its competitive businesses separately,” a bank industry source said. “The company will be able to find potential investors for its wealth management and card businesses if it makes public its possible plans for the divisional sales of its retail banking unit.”
For major financial firms, the price level comes as a serious burden in consideration of Citi's falling revenue here. Big financial groups in Korea want to keep enhancing their brand identities with their own banking or card subsidiaries, while at the same time seeking to find fresh, non-banking revenue areas.
But most of the aforementioned financial businesses operated by Citi overlap with those from existing financial players here. “Even if major banking groups may not join the bid, expectations are mid-tier financial firms will express interest in taking over such competitive businesses from Citi.”
Another source from the financial industry also said the outlook remains optimistic for Citi to find a possible buyer for its card business.
“Citi's card users here are mostly middle-aged, and it holds expertise in revolving credit, as the company adopts U.S. sales strategies here. This is one of Citi's noteworthy differences from other major Korean credit card firms,” the official said.
“Those who want to expand their card business presence in the relatively niche area will show interest in taking over the card business of Citi. But as Citi's card business accounts for only around 1 percent of the local market share, chances are existing card firms will remain hesitant to joining the bid.”
A spokesman at Citibank Korea declined to comment, as nothing specific has been confirmed over whether the lender will change its exit strategy here.
Citibank Korea has recently updated its business strategy in a way to minimize losses from its unprofitable services and attract new customers. The lender cut its interest rate twice last month for its non-collateral loan products. To cut debts, Citi also decided to suspend issuing Citi Rewards credit cards, which had incurred losses for the card unit.
The lender's union is voicing concerns over the management's possible decision for divisional sales, as this will not assure their job security.
“Citibank Korea should take enough time until the lender finds a stable investor which will take over the firm's retail banking as a whole, as possible candidates cannot map out a specific investment strategy in this time of pandemic,” the union said.