With Citi throwing in the towel, there will be very few Western banks focused on the consumer segment in the Asia-Pacific region. HSBC, while headquartered in London, is very much an Asian bank. Standard Chartered may be the last man standing.
Citi plans to sell off its consumer banking units in 13 Asia-Pacific markets. The businesses for sale accounted for US$4.2 billion of the US$74.3 billion in revenue Citigroup earned in 2020 and collectively operated at a loss, the U.S. lender said in a statement. However, Citibank is profitable in some of those markets, such as India, where it has 35 branches serving 2.9 million retail customers.
In mainland China, where Citibank was one of the first foreign banks to locally incorporate (in 2007), foreign banks have in general failed to gain traction in retail banking. Beijing was supposed to fully open its consumer banking sector to foreign competition by 2006 – per the conditions for its accession to the World Trade Organization – but has yet to follow through on that commitment. In the past, concern about foreign domination of the banking sector ensured that local banks remained dominant. According to McKinsey, foreign banks’ share of assets in mainland China actually fell to 1.2% in 2020 from 1.8% in 2010. At this point, it would be hard for any foreign bank to gain substantial market share in China’s consumer banking market.
In contrast, Citibank has more successful consumer banking businesses in both South Korea and Taiwan. In fact, Citi’s consumer banking loan portfolio in South Korea is larger than in Hong Kong or Singapore. The Taiwan business is smaller than the South Korea one but still larger than what Citi categorizes as “developed Asia.”
Still, despite heavy investment over the years, Citibank is far from a dominant player in any of Asia-Pacific’s consumer banking markets. It is worth pondering if Western digital banks aiming to foray into APAC retail banking could learn anything from Citi’s experience. Revolut, with its plans for a financial services super app, and determination to expand everywhere from India to Japan to Southeast Asia, comes to mind. Just like Citi, Revolut will face strong – and in some cases, entrenched – local competition. Meanwhile the same regulators who favored traditional local incumbents will likely back their digital equivalents today, creating challenging conditions for foreign neobanks.