Recently, Citigroup announced a strategic decision to pursue exits from its consumer banking franchises in 13 markets in Asia and EMEA. This bold decision by the new CEO has gotten Fitch Ratings to review its ratings, according to its review the planned divestitures are relevant to its assessment of Citi’s long-term blended operating environment, which has a significant influence on Citi’s rating.
The Rating Outlook was revised to Negative from Stable in April 2020, partly due to downward assessments of certain international operating environments within Citi’s footprint. Accordingly, additional review of the potential impact of these exits is necessary in order to resolve Citi’s Rating Outlook. As of fourth-quarter 2020 (4Q20), approximately 39% of Citi’s total credit exposure was outside the United States.
Franchises identified for divestiture include some of Citi’s larger international consumer businesses, notably Australia, China, India, Indonesia, Korea, Malaysia, Philippines, Taiwan, Thailand, Vietnam, Bahrain, Poland and Russia, which together contributed approximately $56 billion in loans and $4.2 billion in consolidated annual revenues as of 4Q20. Rationale for the exits related to their modest contribution to consolidated net income, lower potential for local market leadership, as well Citi’s pursuit of organisational simplification and greater synergies.
Citi has announced its commitment to continue serving institutional clients in all 13 markets. In terms of timing, Citi announced that some exits could be completed as soon as first-half 2021. However, timing would depend on regulatory approval.
Since the announcement, international banks like Standard Chartered Bank and HSBC, have reinforced their commitment to the region, looking to tap into space soon to be left behind by Citibank.
