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The Wall Street Journal reported that Citigroup is highly likely to drop its commercial banking function in the Korean market and leave only the investment banking (IB) sector. Since the inauguration of the new CEO, the possibility of restructuring in the Asia-Pacific region has been discussed, and it is the first time that Korea has been explicitly mentioned as a target region for withdrawal.
According to a report in the Wall Street Journal on the 1st, Jane Fraser, the new CEO of Citigroup in the United States, is currently reviewing the group’s overall restructuring. According to reports, a Citigroup source said, “There is a possibility that commercial banking (retail banking) operations in parts of Asia, including Korea and Vietnam, will be suspended.” However, the source said that there is no plan to leave the IB function for institutions in all regions, including Korea. According to this proposal, the possibility of withdrawal from Citibank Korea’s consumer sector becomes more promising.
The reason Citibank is considering regional restructuring is because its earnings are behind competitors. Citigroup was once the world’s largest financial company, but was overtaken by other global financial companies such as Morgan Stanley after the 2008 financial crisis. The new CEO has accepted the task of simplifying the banking structure and clearing up costly projects, the report said. Some analysts pointed out that “Citigroup will need a major change in the form of abandoning retail banking of banks in all countries or acquiring a new US bank in order for Citigroup to change.”
Accordingly, the withdrawal of Citibank Korea, which ignited last month, is expected to increase further. Earlier, Bloomberg News reported that Citigroup could carry out restructuring in the Asia-Pacific region. In addition, as the’Korean market’ has been cited as a target for reorganization, the industry is expected to gain more touch.
Some analysts say that if Citigroup organizes the consumer sector of Citibank Korea, a large-scale merger and acquisition (M&A) market could be opened. In the domestic financial sector, DGB Finance and OK Finance are being discussed as potential candidates to acquire Citibank Korea. Under the premise that it will come out for sale, it is expected that OK Financial will enter the banking business, and DGB Financial will likely jump into the takeover in the strategy of expanding its base in the metropolitan area.
Currently, the Korean banking industry’s share price net asset ratio (PBR) is about 0.3 to 0.4 times. Considering Citibank Korea’s net assets (6,295.3 billion won) as of the third quarter of last year, the price is expected to reach a maximum of 2.5 trillion won. However, it is highly likely that the sale target is limited to retail finance, such as asset management and card business, including 39 stores. This is because they have a strong will to leave the corporate finance sector.
Reporter Jeong So-ram/Kim Dae-hoon [email protected]
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