Citi warns of additional costs of its South Korea retail bank exit


Citigroup has warned that it will incur “significant” costs in the years to come as it ends its retail banking operations in South Korea.

The New York-based company announced earlier this year that it would be exiting retail banking in South Korea and 12 other markets. While it signed an agreement in August to sell its business in Australia, Citigroup’s board of directors approved the Korean liquidation plan on Friday, the bank said on Monday in a regulatory filing.

“As part of the liquidation plan, Citi expects to incur significant liquidation costs and related costs through the end of 2023, including cash expenses related to voluntary severance benefits and related costs,” the company said on file.

Even though Citigroup has chosen to end its retail operations in South Korea, the bank said it still expects the exits of the 13 mainstream franchises to be capital accretive and allow the bank release approximately $ 7 billion in tangible equity over time. About $ 2 billion of that amount is linked to Citigroup’s projects in South Korea, the bank said in a statement on Monday.

As Citigroup continues to exit its retail banking operations in South Korea and these dozen other markets, the lender will maintain its institutional franchise in the regions and continue to serve the company’s wholesale and corporate customers. .

“We continue to make progress in updating our strategy, allowing us to increase the capital we return to our shareholders over time,” CFO Mark Mason said in the statement. In Asia and in its operations across Europe, the Middle East and Africa, Citigroup “will focus its resources on higher yielding institutional enterprises and double its wealth, where we have distinct competitive advantages and potential for growth. significant growth ”.

For the remaining 11 markets, Citigroup still weighs in sales. The bank said Monday it was continuing conversations with potential buyers and had seen “strong interest from a wide range of bidders.”

Citibank Korea has started to negotiate severance pay and related costs with employee unions, but “is unable at this time to provide an estimate of the total amount or range of amounts” that may be expected. committed under the liquidation plan, Citigroup said in the statement. deposit.

The fact that Citigroup does not yet have an estimate of the charges related to Korea’s liquidation is “not ideal,” said Susan Roth Katzke, analyst at Credit Suisse Group, in a note to clients.

For Citigroup, “the key will be the potential for further market exits to generate neutralizing gains,” she said.

Citigroup shares fell 0.3% to $ 71.15 at 9.40 a.m. in New York. They have gained 15% this year, underperforming the 38% increase in the S&P 500 Financials Index.

Updated: October 26, 2021 4:00 a.m.

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