이 기사는 2021년 11월 02일 08:04 thebell 에 표출된 기사입니다.

There are growing concerns that the Citibank Korea’s profitability may deteriorate as the competitiveness of its corporate banking business can weaken after the bank’s shutdown of its consumer banking business in the country.

The Korean subsidiary of Citigroup has decided on October 22 to close down its consumer banking operations in phases after failing to find a potential buyer to acquire the business, industry sources said on Friday.

The decision has been made as the group no longer finds the Korean market attractive. The Korea unit accounted for only 1.8% of Citigroup’s total assets in 2020, compared to 2.6% in 2011. Its portion of the US bank's total pre-tax profits also declined from 3.6% to 1.6% during the same period.

The bank will continue to run its corporate banking business in South Korea, hoping to contribute to the development of the Korean financial market through continuous investment in the future. Only the corporate banking business will remain in the country among the bank’s three businesses here - corporate banking, consumer banking, and credit card.

The wealth management business has been considered the lender’s strength. It sharply reduced the number of branches in 2017 to shift its focus to wealth management for high-net-worth individuals.

Despite its efforts, the net profit of its consumer banking business has shrunk from 72 billion won ($61 million) in 2018 to 37 billion won in 2019, and 15 billion won in 2020. It recorded a net loss of 1.5 billion won in the first half of this year.

The competitiveness of its corporate banking business has weakened over the last 12 months. Pre-tax profit of the corporate banking business was 106.5 billion won in the first half of this year, down 29.1% from 150.2 billion won a year ago. Net profit also decreased by 29.5% to 80.2 billion won over the same period.

Some analysts are worried that the competitiveness of the bank’s corporate banking division will get even weaker after the shutdown of the consumer banking business. About 60% of Citibank Korea's total loans are from household and credit card divisions, which are set to be withdrawn from the country. The bank’s overall profits are expected to shrink as the businesses have accounted for 20-30% of total profits over the past three years.

The shutdown of the consumer banking business may also affect the bank’s fundraising ability. The bank will continue to receive deposits from corporations, but the size and stability may decline.

Recently, three domestic credit rating agencies warned Citibank Korea of the increasing possibility of credit rating downgrades, citing that its retail banking exit has made it difficult for them to affirm its current AAA rating with stable outlook.

Insufficient amount of fundraising will force the lender to raise funds through the group-led capital increase or bond issuance, but a lower credit rating is expected to increase funding costs and lower its profitability, the credit agencies said. (Reporting by Jang-jun Lee)