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Citi is considering divesting some foreign consumer units

NEW YORK (BLOOMBERG)- Citigroup Inc. is studying options for slimming down the firm’s sprawling international consumer operations as part of incoming chief executive officer Jane Fraser’s efforts to simplify the bank.

The company is weighing divesting certain units across retail banking in the Asia-Pacific region, including those in South Korea, Thailand, the Philippines and Australia, according to people familiar with the matter.

No decisions have been made, any divestitures could be spaced out over time and the New York-based firm could ultimately decide to keep all its existing international operations, said the people, who asked not to be identified discussing internal deliberations.

“As our incoming CEO Jane Fraser said in January, we are undertaking a dispassionate and thorough review of our strategy, including our mix of businesses and how they fit together,” Jennifer Lowney, a spokeswoman for the bank, said Friday in an emailed statement.

“As you would expect, many different options are being considered and we will take the right amount of time before making any decisions.”

Citigroup climbed after Bloomberg reported the possible divestitures on Friday. Shares rose 3.6 per cent for the day, the biggest gain in six weeks, to close at US$65.78.

Citigroup’s Asia consumer business, which reaches far beyond the region, spans 17 markets – 12 in the Asia-Pacific area and five in Europe, the Middle East and Africa. The unit is home to 16 million credit-card accounts and more than 400,000 wealth-management customers.

The firm also is reviewing consumer operations in Mexico, though a sale there is less likely, according to one of the people. The company operates there as Citibanamex, the second-largest bank in the country, with nearly 1,400 locations, making it Citigroup’s largest branch network.

Combined, the Asia and Mexico consumer units had average assets of US$161 billion last year. They normally contribute more than 40 per cent of Citigroup’s global consumer-bank earnings.

Offloading the international consumer franchise would simplify Citigroup’s business at a time when the firm is under strict orders from regulators to clean up internal infrastructure and controls. The Office of the Comptroller of the Currency and the Federal Reserve criticized the bank late last year for shortcomings in its technology.

Facing years of costly regulatory work, Fraser has vowed to take a thorough look at each Citigroup unit as part of a broad strategic review.

“We’re taking a clinical look at our strategic positioning, assessing which businesses can attain leading market positions in a much more digitalized world,” Fraser told analysts on a conference call last month. “I believe there is value to unlock by simplifying the firm.”

Fraser’s role in Citigroup’s deliberations is whether the bank would be able to find a willing buyer for each unit, according to two of the people familiar with the review. The bank would probably have to sell to local banks in each of the countries, they said.

It’s familiar territory for Fraser. Less than a year after Citigroup named her head of Latin America in 2015, she led the company’s sale of retail-banking and credit-card operations in Brazil, Argentina and Colombia.

At the time, the move came as a shock. The Argentina unit had opened in 1914, when it was the bank’s first non-U.S. branch. But Fraser argued that Citigroup wouldn’t be able to make the investments it needed to achieve proper scale in the three countries.

“It was a tough decision from a history point of view, but it was a relatively easy one from a strategic point of view,” Fraser said in a 2018 interview with CNN. “After the crisis, US banks weren’t allowed to acquire other banks, so we watched the local banks rolling up their retail-banking franchises and consolidating. We grew, but nothing like as fast as you could inorganically.”

Even after those sales, Fraser and outgoing CEO Michael Corbat have been adamant they’d like to keep the firm’s consumer operations in Mexico, despite facing repeated calls to offload the unit. In 2016, the two announced the bank would embark on a four-year, US$1 billion investment in Citibanamex to improve the unit’s technology and upgrade its branches.

Asia focus

Citigroup’s operations in Asia are led by Peter Babej, who previously headed up the lender’s business of advising banks and other financial institutions on mergers and acquisitions. The bank plans to maintain its wealth-management franchise in the region, according to one of the people.

The company often looks to the Asia consumer business for ideas that will shape the future of its U.S. operations, as it did with its most recent partnering with Alphabet Inc.’s Google on a new checking account. Still, Citigroup has said publicly that customers rarely use some of the bank’s 224 branches across the region for transactions.

The firm instead has been focused on building out its wealth-management arm in the region and recently opened its largest wealth-advisory hub in Singapore, a 30,000 square-foot space, with room for more than 300 relationship managers and product specialists.

The firm has said it’s hoping to double its market share and increase the number of clients there by a percentage in the double digits in coming years.

“We see a great opportunity for us to serve the growing affluent segment in Singapore, and believe in the need to continue enhancing our client value proposition by investing in this new wealth hub,” Brendan Carney, CEO of Citibank Singapore, said in a statement last year. “As we continue to grow our business, we will look to open more of such hubs in the future.”

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