Citibank Korea may initiate plan B for partial sale of retail banking

Citibank's logo is seen at Citibank Korea's head office in Seoul, on April 27, when the lender held its first board meeting to discuss an exit strategy to pull out of its retail banking business here. Yonhap

By Lee Min-hyung

Citibank Korea CEO Yoo Myung-soon

Citibank might adjust its “exit strategy” from Korea by selling only a part of its consumer banking operations here, according to domestic banking industry sources. The projection comes as the U.S. lender's planned sale of its Korean retail banking business as a whole remains in the air.

Citibank Korea is scheduled to hold a second board meeting on June 3 to discuss details of its ongoing efforts to sell its retail banking operation. The lender decided earlier to stop operating its retail banking service here due to weakened competitiveness compared to rivals.

Since the announcement, the lender has placed top priority on the sale of the division as a whole. Citibank Korea is accepting letters of intent to strike a “one-shot big deal” and remains mum over which investors have voiced interest in acquiring the retail banking operation, the value of which is expected to top 2 trillion won ($1.76 billion).

Market watchers, however, projected the lender to initiate its “Plan B,” because only a few companies would be willing to take over the firm at that price.

An official at a top-tier banking group said Citibank's retail business is not attractive enough due to the relatively high valuation. The retail business of the overseas lender also overlaps with the networks of most lenders here, according to the official.

“Most big banking groups already run credit card subsidiaries and operate wealth management businesses, so chances remain slim for existing major financial firms to inject trillions of won to boost revenues in those areas,” the source said.

Major financial holding firms ― such as Shinhan and KB ― were considered potential candidates. However, they do not appear too keen to jump into the race, because their top management focus has shifted this year to widening their revenue streams to non-banking sectors. Even if the banking business is a major cash cow, they do not have any immediate plans to invest trillions of won to strengthen their already-stable retail banking businesses.

From that perspective, mid-tier financial firms or provincial banking groups ― such as JB Financial Group, BNK Financial Group and OK Financial Group ― have emerged recently as possible candidates.

But there has reportedly been very little progress, raising the possibility of Citibank Korea opting to sell parts of its retail banking services ― such as wealth management, credit cards and loans ― to multiple investors, rather than sticking to its earlier position of looking for one investor to take over the whole operation.

The prevailing view is that financial firms that already operate wealth management and credit card businesses are highly unlikely to participate in the bid.

“This is why mid-tier financial firms, which do not operate credit card businesses, expressed interest in acquiring Citi's retail banking business,” a financial industry source said. “But selling the unit as a whole still seems very tough for Citibank. When the lender decides to sell portions of the retail banking operation, some small- to mid-tier financial firms will likely show interest and become more active.”

Earlier this month, Citibank Korea CEO Yoo Myung-soon hinted at the possibility that the lender would push for Plan B if it fails to find a single investor to acquire the entire retail banking operations. The lender is expected to engage in detailed discussions on whether to initiate the second option during the upcoming board meeting unless it finds the right candidate in time.

Citibank Korea declined to comment on details of the plan and only said that it would make concerted efforts to find the “best option.”

“We are leaving open all possible measures and will do our utmost to find the best one,” a spokesman for the lender said. If Citibank Korea fails to complete the process for the partial sale of its retail banking business, it will be shut down gradually just like HSBC did back in 2013.