Korean banks interested in some of Citi's Southeast Asian operations Operations in Vietnam and Indonesia most attractive

Translated by Kim So-in 공개 2021-06-14 07:40:50

이 기사는 2021년 06월 14일 07:37 더벨 유료페이지에 표출된 기사입니다.

Domestic financial institutions are paying attention to the sale of Citigroup's banking operations in Vietnam and Indonesia as the U.S. banking giant sends information memorandum (IM) to potential buyers.

Citigroup announced in April that it would exit its consumer banking operations in Korea and 12 other markets, including several Southeast Asian countries like Thailand, Vietnam, Indonesia, Malaysia and the Philippines. The group has sent IM to domestic commercial banks and financial holding companies to receive letters of intent for its banks in Korea and other countries.

Domestic commercial banks are studying the business feasibility of each country while Citigroup hasn’t decided whether to sell its banks in Southeast Asian countries as a whole or in parts. Even domestic financial holding companies that have decided not to submit their letters of intent due later this month are reportedly reviewing the business feasibility in case the sale process will be materialized in the future.

Citigroup entered the Southeast Asian region mainly by setting up branches. It has established its overseas corporate bodies only in China and Korea, and operates branches in other countries like Vietnam, Indonesia, Thailand, Malaysia, and the Philippines.

Citigroup pursues to sell its retail banking operations through a purchase and assumption (P&A), which is a transaction in which a healthy bank purchases assets and assumes liabilities from an unhealthy bank. In order to take over assets and liabilities of Citibank branches’ retail banking business, a potential buyer has to have obtained a license in the relevant country to facilitate the procedures smoothly.

This is why domestic major banks that are mentioned as potential buyers, including Shinhan, Hana, Woori and Kookmin, consider Citibanks in Vietnam and Indonesia as potential targets.

Vietnam and Indonesia are markets with strong growth potential. The two companies have a loan interest rate of 7-8% and a net interest margin of 3-4%, which is considerably high compared to Korea's 1% net interest margin.

Citigroup also has established a strong presence in Vietnam and Indonesia. The group entered the Indonesian market in 1968 and runs 10 branches in six major cities. It entered the Vietnamese market in 1993 and opened its second branch in Ho Chi Minh City in 1998.

However, some market insiders said Citigroup has strengthened its presence in Southeast Asia on the basis of the credit card business, which may deter domestic financial institutions’ acquisition bids.

The issue is that existing customers may stop using Citibank if the banks in the region remove the name ‘Citi.’ Most of the customers use credit cards to transact with Citibank. There are some worries that if domestic financial companies take over Citibank in Southeast Asia, credit card customers are highly likely to stop using the bank, which will make the retail banking business itself useless.

Although Citibank has only a few branches in Vietnam and Indonesia, it could operate its retail business thanks to card transactions,” said an official at a commercial bank. “(Potential buyers are) hesitant because the basis for the business expansion may disappear after the acquisition.” (Reporting by Hyun-jung Kim)
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