Shitibank Quitting Shitty Retail Market

[Samurai_Jerk]

Another QE Casualty: Citibank To Quit Japan's Retail Market

Citibank (NYSE: C) has decided to sell its retail business in Japan. Another in a lengthening list of Abenomics casualties?

[...]

By spring 2002, Japan had experienced a full year of the Bank of Japan’s then much applauded, innovative new policy of 量的金融緩和, ryōteki kin’yū kanwa, translated and forever enshrined in the world’s central banking lexicon as “Quantitative Easing.”

What QE meant in practical terms, and for the banking business, was “zero interest rates.”

[...]

Traditionally, the basic profit model of branch banking had been accumulating consumer deposits in the form of savings deposits and time deposits at a cost lower than the prevailing rate for funds in the interbank money market. Such low cost funds were “purchased” at a profit for the branches by a bank’s internal Treasury department and provided to the bank’s corporate lending department to be lent to customers with another mark-up to compensate for risk and the need for profit.

Suddenly, in 2002, the BOJ’s celebrated innovation of QE had blown up this model. Retail branches, rather than profit centers, became a loss-leading albatross. What to do?

[...]

Citibank had been the earliest and most aggressive bank to promote retail foreign currency deposits. It was by 2002 by far the market leader, and had clearly differentiated its “brand” as the bank offering the highest rates on USD, EURO, AUD, SGD, HKD and other foreign currency deposits. But especially USD, the currency most desired by Japanese consumers.


What made this such a great business for Citibank is that they were able to offer interest rates significantly higher than Japanese banks for USD deposits because Citibank was able to deploy these deposits much more profitably than Japanese banks. How? While Japanese banks generally could only lend USD to their corporate customers at an international market-determined spread of perhaps one percent, Citibank was shipping Japanese consumer deposits back to New York to fund Citi’s credit card loan portfolio where the spread over cost of funds was 8-9 percentage points or higher.

What seems clear now that Citibank has decided to withdraw from Japan’s retail market is that even the USD deposit business has stopped being profitable enough to carry the rest of the retail operations’ costs. This is surely because competitors have found ways to emulate Citi’s model.

Very likely, too, the Fed’s QE has been undermining Citibank’s USD business, while the monetary incontinence being implemented by BOJ governor Kuroda as Abenomics’ “First Arrow” ensures that there will be no improvement in domestic currency economics for the foreseeable future.

[IparryU]

Citigroup Said to Consider Sale of Japan Consumer Bank
Citigroup Inc., the firm that earns the most international revenue of any U.S. lender, is considering selling its consumer-banking business in Japan, two people with knowledge of the matter said.

The company has begun approaching Japanese firms including the three largest lenders, trust banks and regional lenders to gauge their interest, one of the people said, asking not to be named as the matter is confidential. New York-based Citigroup could start a bidding process next month, the people said.

Citigroup, whose 33 branches in Japan represent less than 1 percent of its global total, has pulled back from retail banking in markets with low returns, including Spain, Greece and Turkey. The U.S. bank, which has repeatedly been penalized by Japanese regulators in the past 10 years, would follow HSBC Holdings Plc and Standard Chartered Plc in scaling back in a country where loan profits are hampered by low interest rates.
~snip~

http://www.bloomberg.com/news/2014-08-19/citigroup-weighs-exiting-japan-consumer-banking-nhk-says.html

[Samurai_Jerk]

Already posted.

[IparryU]

Already posted.

Damn, didn't show up in my Hot Tops this morning... ya beat me to it.

[inflames]

Citibank was actually pretty good about giving out credit cards...

After I had my Citibank card for a year with perfect payments Mitsui Sumitomo still was a pain in the ass to get a PiTaPa card (not even the damn credit card version, just a subway card where I could use up to 50,000 yen on transit a month).

Another Japanese bank (aside from Shinsei and perhaps Aozora or Tokyo Star) would pretty much fuck up Citibank (or at least impose a million fucking rules) within about 20 minutes - the people I know who still have accounts there (ironically the people who generate tons of fee based business because of international wires or using the credit cards a ton for their business) would rather quickly get pissed and leave.

[Yokohammer]

From the Citibank Japan website:

Regarding today's media reports
August, 2014

To our customers,

There have been news reports that Citibank Japan is considering the sale of its retail banking business. This report is not based on any announcement made by Citi.

Retail Banking Division
Citibank Japan Ltd.

[Coligny]

Soo... Tepco's PR team found some side job at citybank ?

[Yokohammer]

Soo... Tepco's PR team found some side job at citybank ?

The wording is interesting, isn't it. They're not denying it outright, they're just saying it's not based on any announcement by them. But then, if there was any truth to the story why would they bother with a response like that? Weird.


Sent from my iPad using Tapatalk

[wagyl]

Those statements are pretty common, wording included, when Japanese company's PR departments rush to confirm that they were not the ones who made the announcement that appeared in the press. Maybe it has something to do with stock exchange reporting rules, maybe it has something to do with the fact that most reporting here is no more than massaging of press releases so they want to confirm that it wasn't an official press release from the company, but the "won't confirm, won't deny, but just want to say I didn't say that" press release one day after something breaks in the local press is pretty widespread and has no deep meaning.