Citi Exits Asia Retail To Focus On Wealth Management

Citigroup will focus instead on wealth management and its higher margins.

In a series of sweeping announcements, Citigroup unveiled plans to exit its consumer banking business in 13 markets, mostly in Asia Pacific as well as other regions and turn its focus to wealth management. Markets affected by the global bank’s decision include Australia, Bahrain, China, India, Indonesia, Korea, Malaysia, the Philippines, Poland, Russia, Taiwan, Thailand and Vietnam.

Jane Fraser, Citigroup’s CEO as of March, plans to allocate capital and other resources to the most lucrative services, such as wealth management, to deliver the best results for institutional clients and higher value for shareholders.

In the markets Citigroup is exiting, it lacks scale in the consumer banking business; and cutthroat competition and low profits are the norm, according to experts.

Retail banking operates on very thin margins these days, says Balagopal Gopalakrishnan, an assistant professor of finance, accounting and control at the Indian Institute of Management Kozhikode. “With the increasing penetration of fintech products, the spreads commanded in retail banking have dwindled substantially.”

However, Citigroup has an excellent client base in the emerging affluent and high net worth segments. By forgoing low-profit retail banking, it can better serve the upper middle class and institutional segments.

Globally, the affluent middle class doesn’t do much financial planning, says Elizabeth James, an assistant professor of finance at India’s National Institute of Bank Management. “They are in need of guidance to put them on the road to create wealth. As Citigroup is already well established in the global market of wealth management, it plans to now realize the potential of this huge untapped bottom of the pyramid for its wealth management services.”

Unlike at some banks, wealth management is a part of Citigroup’s institutional business, says Pranav Singh, assistant professor at Indian Institute of Management Ahmedabad. “This stream of business derives large synergies from its extensive international presence.”

Fraser is cultivating the seeds that her predecessor Michael Corbat planted. “As the corporate finance theory says, an organization is focused to reward its shareholders,” says James. “That is what the current CEO is focused on: upscaling businesses worldwide, which has strong growth and attractive returns for shareholders.”