Citi eyes HSBC, ICBC in retail banking push

Wednesday, 20 July 2011 00:11 - - {{hitsCtrl.values.hits}}

HONG KONG: Citigroup’s Asian consumer banking unit is aiming to go head-on against deeply entrenched local players such as HSBC and DBS to shake up the competitive landscape.

“There is a level of indifference across the industry. My philosophy is that it’s an industry that rests on its laurels,” Jonathan Larsen , head of Citi’s consumer banking unit in Asia, said in an interview with Reuters on Tuesday.

“Consumers want a choice to move away from the large incumbent domestic banks that dominate most countries and that’s when we come into the picture.”

Citi’s consumer banking unit is Asia’s biggest profit contributor at $484 million, accounting for about half of the lender’s earnings in the region last quarter and is outsized only by North America.

Asia’s retail banking market has always been dominated by local players such as ICBC in China and DBS in Singapore, with few foreign players willing to compete against them and their deeply entrenched positions.

For example, foreign lenders in China had a market share of only 1.83 percent in the country, consulting firm PwC said in June.

Banks that have done so have had mixed results so far, with HSBC saying in May that it will now focus on retail banking only on 18 markets where it can achieve profitable scale and will begin winding down its United States cards business.

Citi will focus largely on the affluent and the emerging affluent segments of the market that are likely to need the bank’s network across regions, Larsen said.

“We’re not interested in lending to marginally creditworthy customers,” he said. “That’s not our proposition, and we have zero interest in pursuing that opportunity. If there’re other players that want to do that, good luck to them.”

The last major large-scale credit card crisis in Taiwan and South Korea was in 2003 and 2004, when a large number of credit card customers defaulted, hitting many major banks in those two countries, including Citi.

Larsen was previously Citi’s country head in Singapore, where he led an aggressive push into retail banking in a market that had previously been dismissed as saturated and overly competitive.

The bank is also opening branches in China as quickly as it can, subject to the regulatory limit of two branches per city per year, he added, with credit losses negligible around the region even as governments tighten monetary policy.

“Credit losses are low around the region,” he said. “Part of it is environmental, but we’re usually two-thirds to half the delinquency level of the industry average in the unsecured space and we’d like to keep it that way.”