Are you a Citibank customer?

Banking circles are rocked by the news of Citibank’s exit from retail banking business in India. Well, they are exiting 13 out of 16 countries where they are present, and India is only one of those.

Citibank is the oldest foreign bank in the country, and there is a certain snob value attached with the brand, due to its high minimum balance requirements. However, they made deeper forays into retail banking with the Suvidha account. Almost every bank has launched variations of the savings account product after that. Citi Financials was their non-banking finance wing working in consumer finance space.

They captured a large slice of the pie in the credit card space, and this segment will lure many banks towards acquisition. Citicard customers are all happy ones, and any bank will be happy to tap into this segment for the credit card business, as well as for cross-sell.

What happens to Citibank customers?

As per Citibank officials, business will continue as usual, till they find a buyer for the business. The customers will therefore, not be affected by it.

Thereafter, the branding will gradually change to align with the buyer’s identity.

Citigold customers are the premium layer of the bank’s clientele, and Citibank caters to their international banking requirements. Citibank may offer to meet their international banking needs, through a suitable agreement with the acquirer institution.

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What happens to Citibank employees?

There are 35 branches and 4000 employees in India as of now, and all are being retained. There will be no closures or layoffs. Shifts may happen in the top layers gradually, as a new entity takes over.

Citibank will continue with the Wealth and Institutional business in India, so a certain section of employees may be accommodated there. 

Why is Citibank exiting India?

The capital expenditure is growing, and the profit margins from retail banking business are under stress. They have decided to focus on core strength areas, which have yielded high profits in the last 2-3 years.

The bank is going through a major overhaul and regrouping in the last few years. The latest erroneous payment of $900 million through Wipro is reported to be the costliest mistake in banking history. However, it appears to have no bearing on this decision of quitting retail businesses in 13 countries, including India and China.

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Who acquires Citibank retail business?

The likely buyers are mid-size private sector banks such as Axis, ICICI Bank and Kotak. The name of SBI Cards figures in the list of prospective suitors.

It may be recalled that IndusInd Bank had acquired the credit cards business of Deutsche Bank in 2011, in a similar acquisition. They did not have a credit card product of their own till then.

The suitor banks named above may want to acquire the credit cards business to widen and deepen their market share.

However, different institutions may bid for different segments of the business and acquire those. It is not necessary that the entire business will be taken by a single entity.

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