CITIGROUP Inc is preparing to sell its Japanese retail banking operations, a source with direct knowledge of the matter said yesterday, as it waves the white flag on a venture plagued by regulatory troubles and anaemic lending.
The company, which pioneered 24-hour ATMs in Japan, was the only foreign bank to make a major push into its retail banking sector is throwing in the towel after failing to gain enough scale to justify its costs.
Citigroup has also signalled a desire to refocus its overseas strategy on growth markets and away from saturated mature markets, such as Japan, where it has been doing business for more than a century.
Citi has approached Japan’s top three lenders — Mitsubishi UFJ Financial Group, Mizuho Financial Group and Sumitomo Mitsui Financial Group — about a sale as well as regional banks, said the source, who was not authorised to discuss the matter publicly.
The United States bank will keep corporate and investment banking and trading businesses in Japan, the source added.
Industry officials say it may be difficult to find a buyer for a modest retail banking operation with weak loan demand and falling interest margins, which has had regular run-ins with regulators.
“The company has been penalised three times by regulators, so there are issues with compliance that would make us cautious,” a senior financial industry executive said. He asked not to be named because of the sensitivity of the matter.
Citigroup had 33 retail branches and 3.6 trillion yen (RM110.95 billion) in deposits as of end-March, ranking 30th among 64 top-tier regional banks in Japan. But its loan book, with an outstanding balance of 356.2 billion yen, was near the bottom of the list.
For the latest year to end-March, it posted a 1.3 billion yen net profit on revenue of 68.3 billion yen.
Lending has been sluggish in Japan overall as corporations sitting on massive amounts of cash are reluctant to borrow or invest aggressively, while dull wage growth has left households cautious about spending.
Prospects for a sale could be dampened by worries that customers would flee if their deposits changed hands to a Japanese lender and they lost access to Citi’s global banking network.
The bank has also faced persistent compliance problems. It was penalised three times by regulators from 2004 to 2011 over inadequate monitoring of transactions under anti-money laundering rules and insufficient disclosure of risks in marketing financial products. Reuters