Citi asked to keep promise over job security

Citibank Korea's head office in Seoul / Yonhap

By Lee Min-hyung

Citibank Korea's CEO, Yoo Myung-soon

Citibank Korea's planned sale of its retail banking business will continue to face setbacks, as its CEO Yoo Myung-soon pledged to “ensure job security” for its employees as a top precondition before signing any deal with a potential buyer.

The CEO's decision comes as a burden for possible investors, as the average annual salary of the bank's staff far exceeds that of the local banking industry. Citibank Korea's average salary last year reached 112 million won ($100,200).

A general consensus is that few investors are willing to undertake the financial burden to take over the retail banking business at a time when the lender's profit declines sharply. Citibank Korea generated 48.2 billion won in net profit in the first quarter, down by 19 percent from the previous year. The company is the only commercial lender here that reported drops in quarterly earnings.

Even if more than four financial firms are known to have submitted a letter of intent for the acquisition, nothing specific has been fixed over whether they are actually willing to finalize the deal with Citibank Korea.

The lender recently held a board meeting to determine its specific exit strategy, but delayed making the decision until July. Initially, the lender pushed for the sales of the retail banking as a whole, but it shifted the strategy by including other options ― such as divisional sales of the business, including wealth management, credit cards and loans, to a group of multiple investors.

“It is tough for any leaders of companies to promise to guarantee job security before the sale of their business,” a banking industry source said. “But this situation will put a continued brake on its sales process. No investors will welcome the prerequisite proposed by the lender.”

“Citibank will continue to fall into a state of deadlock in its exit strategy, as it appears very hard for the lender to satisfy both potential investors and the labor union under the current circumstances.”

As of the end of last year, more than 60 percent of the lender's total number of employees worked at its retail banking business, according to the lender's labor union.

This fact raised the possibility that Citibank Korea will accept the voluntary retirement of its employees sometime in a near future, for the first time in seven years since 2014.

Citibank Korea said that it is considering the option of encouraging employees to apply for voluntary retirement to promote the smooth sale of the company.

“We are leaving open this scenario, but any specific schedule over when to start accepting it has not been confirmed as of now,” a spokesman of the lender said Wednesday.

Citibank Korea and that its labor union will continue to clash unless the lender finds an investor to take over the retail business as a whole, as union members strongly oppose the idea of divisional sales or a phased shutdown of the unit.

With the union stepping up pressure against Citibank's management, chances are that the lender may not be able to make its decision over its exit strategy even during the upcoming board meeting next month.