Citigroup (C) to Shut Down China Consumer Banking Business
As part of its broader strategic actions, Citigroup C has announced plans to wind down its consumer banking business in China. The country was part of the 14 markets in Asia, Europe, the Middle East and Africa and Mexico that the company had identified in April 2021 to exit the retail franchise.
The products and channels impacted by the shutdown include deposits, insurance, mortgages, investments, loans and cards. Citigroup intends to pursue the sale of portfolios within its Chinese retail banking business. The company, however, has no plans to exit the institutional business in the country.
The company noted that the cost of shutting down the business will have no material impact on its financials, including the projected capital impact from the overall strategy. Further, around 1,200 employees will be affected by the move. The company will explore other options for those employees who wish to continue to work at Citigroup in China or across its global network.
Titi Cole, Citi’s CEO of Legacy Franchises, said, “While we explored multiple strategic options for our China consumer business over the past several months, we believe that this path makes the most sense and we are focused on a seamless transition for our clients, partners and colleagues.”
Our Viewpoint
Citigroup continues to increase its fee-based business mix and shrink non-core assets. The company has been emphasizing growth in core businesses through streamlining operations internationally. Apart from China, the bank will wind down its Russian, South Korean and the U.K. consumer banking businesses while expanding personal banking and wealth management businesses.
Since the announcement of the broader strategic actions, Citigroup has signed deals to divest consumer businesses in Indonesia, Taiwan, Vietnam and India. It has also completed the sale of the Bahrain, Malaysia, Thailand, Australia and Philippines consumer banking businesses. Such exits will free up capital and help the company pursue investments in wealth management operations in Singapore, Hong Kong, the UAE and London to stoke growth. These efforts will likely help augment the company’s profitability and efficiency over the long term.
Over the past year, shares of Citigroup have lost 23.9% compared with a decline of 19.6% recorded by the industry.
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Currently, Citigroup carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Inorganic Growth Efforts by Other Banks
F.N.B. Corporation FNB has completed the acquisition of Greenville-based UB Bancorp. Further, UB Bancorp's bank subsidiary, Union Bank, merged with FNB's bank subsidiary, First National Bank of Pennsylvania. The acquisition further bolstered the company’s presence in North Carolina and added “low-cost granular deposits,” which will likely be accretive to its financials amid the present economic backdrop.
Following the completion of the transaction, F.N.B. Corp has nearly $44 billion in total assets, $35 billion in deposits and $29 billion in total loans on a proforma basis. Vincent J. Delie, Jr., chairman, president and CEO of F.N.B. Corp. said, “The Union Bank acquisition leverages FNB’s current investments in the fast-growing North Carolina markets which now have more than 110 FNB branches and over 300 ATMs while also providing a favorable deposit mix.”
Washington Federal, Inc. WAFD announced it is entering the lucrative and “fast-growing” California market. The company signed an agreement to acquire Luther Burbank Corporation LBC and its wholly-owned subsidiary, Luther Burbank Savings, for $654 million. WAFD is expected to use the deal as “a platform for growth in attractive California markets.”
At present, LBC operates in California, Washington and Oregon through 11 full-service branches and seven loan production offices. Upon closure (expected by June 2023-end), the combined entity will have almost $29 billion in assets, $23 billion in total loans and $22 billion in deposits across 212 locations in nine western states.
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