Citi's Southeast Asian operations more attractive to Korean banks

Pedestrians walk past a Citibank branch in Singapore, Friday. EPA-Yonhap

By Park Jae-hyuk

Domestic financial groups are paying more attention to the looming sales of Citigroup's banking operations in Southeast Asia than assets up for grabs in the Korean market, raising concerns that the U.S. financial firm may face difficulties in pursuing its exit strategy from Korea.

Last week, Citi announced it would sell off its consumer banking operations in Korea and 12 other markets, including several Southeast Asian countries including Thailand, Vietnam, Indonesia, Malaysia and the Philippines.

Shinhan Financial Group said its department in charge of mergers and acquisitions (M&As) has already studied Citi's businesses in those countries. According to industry sources, the Korean banking group is particularly interested in acquiring the U.S. financial giant's operations in Thailand and the Philippines.

Shinhan, which has accelerated efforts to expand its presence in Southeast Asia, operates banking subsidiaries in Cambodia, Vietnam and Indonesia and also has branches in the Philippines, Singapore and Myanmar.

Citi has been the largest commercial bank in the Philippines, which it entered in 1902. Its operations in Thailand are also considered attractive to Korean financial firms, because they have faced setbacks in reentering the country after pulling out during the 1997 Asian financial crisis, despite the Bank of Thailand's efforts to keep them there.

But at the same time, Shinhan has been wary of market watchers attaching too much importance to its previous study on Citi's Southeast Asian operations, because the U.S. firm has yet to disclose specific exit plans for those 13 countries.

“The basic role of our M&A department is studying companies that are expected to be put up for sale,” a Shinhan spokesman said. “The team is looking at other firms in addition to Citi.”

KB Financial Group, which is mentioned as one of the candidates to take over Citibank Korea's wealth management division, is also said to have reviewed the business structures of Citi's Southeast Asian operations, although it officially denied speculation that it is considering an acquisition.

“It is true that we started paying attention to the Southeast Asian market from last year, but we have never officially said that we are interested in Citi's operations,” noted a KB spokesman.

In contrast to the growing interest in Citi's Southeast Asian operations, Citibank Korea's retail banking business does not appear to be attractive to major financial groups because they do not need the bank's license or branches here.

“There is no reason for the nation's four-largest financial groups to be interested in Citi's commercial banking business in Korea, although they may consider the acquisitions of Citi's subsidiaries overseas as it has made inroads into many Southeast Asian countries,” an industry insider said.

Citibank Korea has faced worsening profits, yet has been passive about pursuing new businesses, such as MyData. The bank's union is also threatening to stage an all-out strike against any personnel restructuring.

Such factors are unfavorable for the envisioned sale of Citibank Korea's consumer banking operations. Although the bank's board members are expected to discuss the exit next Tuesday, a source familiar with the issue said the lender's retail banking business will be put up for sale.