According to a report in The Financial Times, Citigroup Inc.’s (C) operations in South Korea could face a labor strike in the near future. The recent closure of certain Citigroup branches in the country could cause the strike. The labor union is already in talks with the company’s management on issues related to wages and the restructuring action being undertaken.
Citigroup closed 22 branches in South Korea within the first nine months of 2013. Given the sluggish loan growth and high regulatory interferences, the company is shuttering branches in the country.
Further, in the third quarter, Citigroup’s consumer banking revenues in Asia fell 2% year over year partly due to significant regulatory changes in South Korea. Moreover, Citibank Korea’s third-quarter net income decreased 53% from the prior-year quarter to Won27.9 billion ($26 million). This was the weakest performance for the unit since 2006.
Though management expects revenues in South Korea to begin stabilizing from early next year, Citigroup’s repositioning efforts are expected to be a drag on overall revenues for Asia throughout 2014.
Apart from Citigroup, many other global banks are trimming their operations in South Korea. Earlier this month, U.K.-based Standard Chartered PLC (SCBFF) announced plans to slash its number of branches in the country by 25% to 250. Further, in Jul 2013, HSBC Holdings plc (HSBC) declared the decision to exit its retail banking and wealth management businesses in South Korea.
In Mar 2013, Citigroup unveiled its financial targets to be achieved by 2015. Moreover, the company announced restructuring initiatives in the markets where it operates. Though streamlining of operations and efficiency improvement would help the company in accomplishing its goals, a possible industrial strike could be a deterrent.
Currently, Citigroup carries a Zacks Rank #3 (Hold). A better performing major global bank is BankUnited, Inc. (BKU) with a Zacks Rank #2 (Buy).