Last month, news of Citigroup’s gradual shutdown of its personal banking business in China led many to speculate that Citibank might be exiting the Chinese market, with major media outlets reporting and speculating on the matter.
In reality, Citibank’s corporate banking business in China is still operational, and Citibank has recently issued an official statement: they will not exit China!
As of now, Citigroup’s total assets amount to $2.37 trillion, ranking third in the United States, after JPMorgan Chase and Bank of America. The latest market value of Citibank is nearly $600 billion!
Citigroup has been operating in the Chinese market for 121 years and successfully transformed in 2007. Currently, Citigroup serves approximately 70% of the Fortune 500 companies in China, with around 7,500 employees across 12 cities.
However, it’s worth noting that Citibank’s personal credit card services in China will soon be terminated, and they have transferred their personal wealth management business in mainland China to HSBC.
Due to poor financial performance, Citibank may also conduct global layoffs in the near future. Citibank has made significant moves recently, so the impact of this turmoil on their market presence is expected to be substantial.
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Just Now, a $600 Billion Foreign Bank Giant Speaks Out Urgently!
Citibank (China) Co., Ltd. released a statement through its official WeChat account yesterday, stating, “Recently, some self-media and social media have disseminated untrue reports and misleading statements regarding ‘Citibank’s exit from the Chinese market,’ which are exaggerated and baseless.”
The statement mentioned that Citibank (China) has filed complaints against these untrue reports and requested the removal of false statements from the platforms. They reserve the right to pursue legal action against false statements.
The statement also clarified that Citibank is strategically adjusting its global personal banking operations, which includes gradually closing its personal banking business in mainland China. This adjustment does not affect corporate and institutional customer services, and Citibank will continue to develop its corporate and institutional customer business in mainland China.
Citibank is a well-known name, but many may not have a clear idea of how significant this bank is.
Citibank, a subsidiary of Citigroup, traces its roots back to the New York City Bank, founded on June 16, 1812. It is headquartered in New York, USA, and is the third-largest bank in the United States by assets, with branches in nearly 160 countries and regions worldwide.
Publicly available data shows that Citibank’s total deposits amount to $204.3 billion (equivalent to CNY 1.47 trillion), and its total assets amount to $935.2 billion (equivalent to CNY 6.733 trillion). These numbers do not include Citibank’s overseas institutions.
Citigroup’s total assets are valued at $2.37 trillion, ranking third in the United States, only behind JPMorgan Chase and Bank of America.
It’s worth mentioning that Citibank was the first U.S. bank to establish operations in China. In 1902, one of Citibank’s predecessors, the International Banking Corporation, opened a branch in Shanghai, making it Citibank’s first institution in Asia.
As a company primarily focused on providing financial information services, Citibank currently serves approximately 70% of the Fortune 500 companies in China, more than 300 leading local large enterprises, and numerous emerging medium-sized enterprises.
As of the closing of the U.S. stock market on the 7th, Citigroup’s stock was valued at $41.98 per share, with a market capitalization of $80.306 billion (approximately CNY 584.5 billion).
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And all of this traces back to a notice issued by Citibank in October!
On October 9, Citibank China’s official website released a notice stating that Citibank had signed an agreement with HSBC China to transfer its personal banking wealth management business in mainland China, including accounts, deposits, and related wealth management products held by individual customers, except insurance products.
The total transaction amount is approximately $3.6 billion, and the transaction is expected to be completed in the first half of 2024.
In fact, as early as April 2021, Citibank announced its plan to restructure its global personal banking operations, including plans to exit personal banking in 14 global markets, including the Chinese market.
For Citibank, its strong performance in corporate and institutional customer business has been a source of satisfaction, and this may have influenced Citibank’s strategic decision.
However, the personal banking business for Citigroup has become more of a burden than an asset. Citigroup’s CEO, Jane Fraser, publicly stated that Citigroup lacks the scale necessary for competitive personal banking operations.
In other words, the profitability of this business didn’t meet expectations and may have even become a drag on the entire group.
Looking at the financial data from the past three years (2019-2021), Citibank’s revenues in China have been consistently decreasing, reaching CNY 5.95 billion, CNY 5.58 billion, and CNY 5.44 billion, respectively. Net profits also experienced fluctuations, with CNY 2.07 billion, CNY 1.73 billion, and CNY 1.8 billion in the same time frame.
In 2020, Citibank’s retail business revenue accounted for only 5.4% of its total revenue, while the expenses exceeded $3 billion, making up 7% of Citibank’s total expenses.
In 2021, Citibank China’s personal deposits and loans decreased. Personal loans and advances went from CNY 23.399 billion in 2020 to CNY 22.805 billion, and both current and time deposits saw a decrease compared to 2020, with personal current deposits decreasing by CNY 0.971 billion to CNY 6.021 billion and personal time deposits decreasing by CNY 1.858 billion to CNY 6.636 billion.
Citibank China stated that the exit would only apply to the personal banking business, not the corporate and institutional customer business, and the bank would assist customers in transferring their deposits and holdings, gradually terminating credit card services.
However, a complete closure of all operations may still take several years.
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Recent quarterly reports show that Citibank’s cumulative revenue for the first three quarters of the 2023 fiscal year was $61.022 billion, compared to $57.332 billion for the same period the previous year, representing a 6.44% year-on-year increase. The cumulative net profit for the first three quarters of the 2023 fiscal year was $11.189 billion, compared to $12.4 billion for the same period the previous year, indicating a 9.77% year-on-year decrease.
Citigroup’s underperforming financial results in recent years have prompted them to initiate streamlining measures. The bank is considering cutting at least 10% of its staff in several major business departments.
According to reports from Shanghai Securities News on November 7, Citigroup CEO Jane Fraser and her management team and consultants are discussing the possibility of cutting at least 10% of their workforce in several major business departments.
In fact, Fraser announced her restructuring plan back in September this year, aiming to save Citigroup’s long-standing underperforming stock prices and lackluster trading performance by reducing staff and cutting costs. This is considered the “largest restructuring in 20 years” for Citigroup.
In this restructuring plan, Citibank has abandoned two longstanding core operating divisions—one focused on institutional customers and the other responsible for consumer products. Additionally, the management layers have been reduced from 13 to 8. Reportedly, 15% of functional roles have been eliminated in the top two leadership layers, and 60 committees have been canceled.
If Fraser decides to cut more than 10% of the workforce, it would be one of the largest layoffs on Wall Street in recent years. In recent years, the international financial market has experienced significant volatility, leading to rising labor costs for Citibank due to regulatory pressure.
Other major banks have been laying off employees this year, but Citibank’s headcount still remains at 240,000, second only to JPMorgan Chase in terms of the number of employees. However, JPMorgan Chase’s profit margin far exceeds Citibank’s.
Since taking over as CEO of this banking giant in 2021, Fraser has been working to improve profitability, streamline the bank, and address regulatory issues.
However, the bank’s stock price continues to lag behind its peers.
In 2022, Citigroup’s stock price fell by 22.09%. This year, Citigroup’s stock price continued to decline, with a 2.76% decrease from the beginning of the year, significantly trailing behind its main competitor, JPMorgan Chase, which saw a 10% increase.
Citigroup’s stock price experienced a slight drop on November 7, with a cumulative decline of over 7% since the beginning of the year.
In summary, Citibank’s exit from the Chinese personal banking business should not be seen as a surprising development.
It is a normal business decision influenced by various factors, including market competition, profitability, and risk management.
The banking industry is highly competitive, and banks need to continually adjust their business strategies to ensure long-term sustainability.
For the average person, this decision may not have a significant impact on their daily life, as other banks continue to provide services in China, and market competition remains, offering customers a diverse range of choices!
References:
- “Citibank Urgent Statement,” China Economic Net.
- “Citibank’s Withdrawal from Personal Banking,” Shijie.
- “Foreign Bank Giant’s Urgent Statement!” Securities Times.