Citi moves with urgency to ditch consumer assets

IFR 2416 - 15 Jan 2022 - 21 Jan 2022
4 min read
Americas, Asia
Philip Scipio, Thomas Blott

Citigroup chief executive Jane Fraser is moving swiftly to deliver on her pledge to streamline the bank's operations and focus on key markets, and last week unveiled plans to exit consumer banking in Mexico and sold assets in Asia as part of a "strategy refresh".

"We are executing and delivering against our priorities … and we are doing so with a real sense of urgency," Fraser told analysts on the bank's fourth-quarter earnings call on Friday. "We are laser focused on swiftly and successfully implementing the strategic decisions we made over the past year to improve returns to our investors."

Citi said it would exit the consumer, small business and middle-market banking business of its Mexican unit Citibanamex and will focus on institutional and wealth management businesses in Mexico.

It ended the week by agreeing deals to sell businesses across Asia. United Overseas Bank agreed to buy the retail banking businesses in four markets in South-East Asia for around S$4.9bn (US$3.65bn) as part of plans announced last year by Citi to drastically scale back in consumer banking.

"This means that within eight months of making the decision to exit these 13 businesses, we have a clear path in a majority of them, and we are well into the process in the remaining markets," Fraser said of the Asia deals.

Clinical look

Analysts and investors have long called for Citi to sell off pieces of its global franchise – particularly Citibanamex. Less than one year since taking the helm as CEO last February, Fraser has made the call to jettison non-core businesses.

"This was not a decision we took lightly. We took a clinical look at our franchise in Mexico, and we drew the hard conclusion that the non-institutional businesses do not fit our new strategic direction," Fraser said.

Citi has operated in Mexico for more than a century and the bank said Mexico would remain a priority market and expected the country to be a major recipient of global investment and trade flows in the years ahead. Citi will continue to operate a locally licensed banking business in Mexico through its global institutional clients group.

In the first three quarters of 2021, the businesses Citi intends to exit accounted for US$3.5bn in revenue, US$1.2bn in earnings, and US$44bn in assets.

Citi said the exits would enable it to direct resources to opportunities aligned with its strengths and competitive advantages and allow it to simplify operations.

"The refresh will allow Citi to better execute a targeted consumer strategy, double down in wealth, and focus on our higher-returning institutional businesses," said chief financial officer Mark Mason. “Our emphasis is on opportunities where our global network uniquely positions us to support clients who are growing and facing an ever-changing set of complex dynamics around the world."

Premium price

Citigroup said UOB would pay a cash consideration equal to the net assets of the businesses in Indonesia, Malaysia, Thailand and Vietnam, plus a premium of S$915m.

Citi's consumer banking businesses in those countries have a net asset value of about S$4bn, according to a separate statement from UOB. This means the acquisition price based on the current NAV would be S$4.915bn.

The sale will see UOB take over the retail banking and credit card businesses in each market along with roughly 5,000 consumer banking and support staff.

The acquisitions are due to close between mid-2022 and early 2024.

Citigroup has already struck agreements with National Australia Bank and Union Bank of the Philippines to sell its consumer banking businesses in Australia and the Philippines, respectively.