Ultimate magazine theme for WordPress.

Citigroup expects to take up to $1.5bn charge on South Korea exit

0 10

Citigroup has said it expects to incur a charge of up to $1.5bn in connection with exiting its consumer banking business in South Korea.

The wind-down of consumer operations in the country is part of the bank’s retreat from 13 markets across Asia, Europe and the Middle East to refocus on more profitable business lines. The process has so far been marked by losses and complicated by talks over how to retain staff.

In the most recent quarter, Citigroup reported a $680m pre-tax loss tied to the sale of its Australia business. The bulk of the charges in the South Korea business are related to severance costs tied to voluntary early retirement programmes.

Citigroup had sought to sell most of its international consumer franchise but decided it was more cost-effective to close it down in South Korea.

“We continue to have good conversations with potential buyers of our consumer businesses across the two regions,” chief financial officer Mark Mason said. “In terms of Korea, however, the economics of winding down the consumer business are much more attractive than continuing to run the business.”

The third-largest US lender had been preparing to part with about 16,000 staff across Asia as it pulls back from the region, the Financial Times reported last week.

The bank expected the South Korea-related charges to be spread out over the next year as voluntary retirements were accepted, it said in a filing. The updated timeline reflects an accelerated exit compared with last month, when the bank warned it could incur significant charges related to the exit through 2023.

Last month, Citigroup received about 40 final bids from rival banks for its retail lending businesses in the 11 international markets it plans to exit after Australia and South Korea, sources told the FT. The bank expects deals to be finalised by the second quarter of next year.

The anticipated sales mark the end of Citigroup’s long-term ambitions to be a global consumer bank and fit the broader trend of retreat by global banks. Last year, the 13 consumer markets it is leaving operated at a slight loss.

Earlier this year, UK banking group HSBC sold its US retail business, giving up on its 40-year attempt to run a full-service bank in the country. At the time, the bank said it expected to incur a $100m pre-tax charge associated with the sale.

Citigroup’s announced disposals have been cheered by investors who have urged the bank the abandon unprofitable markets. The bank’s shares rose 3 per cent to $68.97 early on Monday.

Additional reporting by Stephen Morris in London

Leave A Reply

Your email address will not be published.