T.He is “Deli-Daling”., To use the term Jane Fraser put forward after taking charge of Citigroup in early 2021, is almost over. Outside of America and a few international centers, the distinctive blue branch that was once a common feature of the world’s major cities will soon become the remnants of another era, such as the black, yellow and red Kodak symbols. The New York-based bank, which has built a reputation as a global consumer giant for decades, is retreating. From now on it will primarily focus on commercial banking and asset management, serving large and medium-sized businesses and billionaires. The retail branches it holds will be mostly concentrated in a few domestic markets, such as New York and California.
A series of announcements have already been made: the sale of Australian retail activities to the National Australian Bank in August; Those who crashed in South Korea in October; Sold Philippine business to Unionbank of the Philippines in December; Branches of Indonesian, Malaysian, Thai and Vietnamese in January at United Overseas Bank of Singapore (UOB), Whose chief executive, Wei E Cheong, commented that his organization had added a single deal that took half a century to create “even the city”; And, also in January, the sale of the city’s consumer business in Taiwan DBSAnother is the Bank of Singapore.
The rest of the announcements are expected to come soon. One of the most important would be about India, where the city has a long-term impact; Axis Bank, India’s third-largest private sector lender, is said to be close to picking up business at around 2.5 2.5 billion. Operations are still ongoing in China, Russia, Poland and Bahrain. Banamex, Mexico’s third-largest bank, was recently added to the list. Delays will only erode whatever is left in this activity as employees and customers look for a stable home.
City’s retreat is not unique. HSBC, Which came close to global ambitions like Citi’s in retail banking, has lagged — though not dramatically, at least partly because its core market, Hong Kong, is much smaller than Citi. Australian No. Six years ago a Pan-Asia strategy was abandoned. Like Citi, these banks have offices around the world for corporate business, from lending to treasury services.
As a result, it is tempting to view City’s retreat as another failed attempt at world domination in consumer banking. But it differs from past failures in two respects: the sheer ambition behind early expansion and the legacy it has left behind in the global retail-banking market.
Important for Reed
The expansion was based on the rethinking of global financing, where a vast network served everyone, everywhere, in every way. Like many ambitious plans, the City’s global push was a response to problems at home. In the 1970s, regulatory restrictions created a retail-branch network that was limited to New York City, unprofitable and unable to provide the funds that the city wanted for its debt business. While on vacation, John Reid, a senior executive, wrote a seven-page “memo from the beach” arguing that an alternative would be to completely dump retail banking for the city, a path taken later by the Bankers Trust (now part of Deutsche Bank). , Bank of New York and State Street in Boston, among other institutions. The other option was to go too big.
Mr Reed believes that instead of thinking about retail banking as deposits and loans, the city should respond to the wider financial needs of families, whatever they may be. Through “success transfer”, as the bank has dubbed it, the solutions developed in one market can be brought to another market, creating a scale economy where they will not be in a self-contained local organization. The bank came up with a clever slogan to fit in: “City Never Slips”.
There have been heavy losses over the years to create a new form of retail banking, the components of which are now so well known that it is hard to imagine that they did not exist at one time. This includes ATMs (CTE was the first major American bank to introduce a customer-friendly machine on a scale), credit cards (of which it has become the world’s largest issuer) and electronic payments (which was one of the first to offer to retail customers))
Citi’s reputation as a driving force in financial technology expanded in the 1990s, when more than one million customers received floppy disks, including software updates enabling proto-internet banking. Aware of the existing detection challenges in a transition from human contact to branches, the bank has experimented with retina-scanning technology that, with facial recognition, is now becoming commonplace.
These innovations have helped in international expansion. Mr. Reid became the bank’s chief executive in 1984, and an ever-expanding market for particularly bizarre endeavors opened up, from Nigeria and Sweden (through the acquisition of Hong Kong) to Thailand, as well as in London and Geneva. The bank has also opened a representative office in Beijing. Numerous mill, processing and innovation centers have been set up in Silicon Valley, the Philippines and most importantly in India, where they have played a key role in sprouting the country’s vibrant technology-outsourcing industry.
Bank Drive was a magnet for bright people. The alumni included a former prime minister and current finance minister of Pakistan, a former central bank governor of the Philippines, and future leaders of a number of financial institutions, including India’s largest private-sector bank by wealth. HDFC Banks বাজার whose market capitalization is more than 90% of the City alone — and DBSThe current chief executive came to the bank after becoming a star in the city.
In many ways it reflects the success of the city, but it also reflects its weaknesses. “Success Transfer” was meant to create competitors in the end. Local regulators create their own barriers, restricting the right of foreign banks to open branches or link international accounts, thereby weakening the scale economy. After Mr. Reed’s departure in 2000, technological innovation faded. Co-competitors, run by former Citibankers, copy City’s innovations, sometimes improving them or offering them cheaper.
Then came the global financial crisis in 2007. After huge losses of over $ 300 billion in risky assets, the city needs a bail-out — in a pinch, it’s not an American, global organization. Stricter new internal regulations complicate international transactions while not blocking them.
It started a long time of contraction. Initially German retail activity was $ 7.7 billion, followed by Turkey, Brazil, Egypt and more than a dozen other countries. As if the United Nations of banking is being wounded. Asian and Mexican operations remain, each offering many possibilities in different ways. But Mrs. Fraser, who joined the bank in 2004 and was less attached to the old strategy, concluded that the bank lacked the scale needed to compete in many markets.
An interesting feature of the final calculation is how important the Asian operations really were for the City’s results. Their presence has largely outweighed their financial relevance: Asian businesses that are being sold account for only 1.6% of group revenue in 2021. It helps to explain the lack of bidders. None of the businesses were purchased by Standard Chartered or HSBC, And their own far-reaching operations are now in question. A few years ago, JPMorgan Chase’s boss, Jamie Dimon, formerly of City, considered replicating his global network, only to conclude that building a retail business market by market was not effective. It is also surprising that the Chinese bank, the new Goliath, has made little effort to build foreign retail activities.
The buyers of the City’s Asian assets, to the extent that they have emerged, are either entirely or somewhat local. True, from Singapore DBS And UOB Willing to acquire overseas, but not too far from Taiwan and Vietnam, especially banks whose home markets are small and serve as hubs for Asian finance. Local and regional integration would seem to be more reflective of the time.
As Mrs. Fraser moves toward the breakup, she will no doubt have to grind her teeth into an organization that to many outsiders looks like a shadow of her predecessor. It may be of some consolation to current and former Citibankers that the technical elements of Mr. Reed’s vision have been adopted through the interconnectedness of the global financial system.ATMs and credit cards have long been ubiquitous, and through fintech operators such as Grab in Singapore, Ant Group in China, and Wise in the UK, which enable electronic payments and remittances. Citi’s experience, in short, suggests that the benefits of globalized finance can be more easily enjoyed by the system as a whole than by any single individual. 3
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This article was published in the print edition of the section “The Citi that was never finished”.