Citigroup Inc.’s new Chief Executive Officer Jane Fraser is facing a new question that is What to do about the consumer banks of Asia? Out of 19 banks that Citi operates globally, 12 are in the Asia-Pacific region. Over the next seven years, the institutional client group, which houses the corporate and investment banks, became twice as profitable as the stagnant consumer franchise. Some investors even began to ask if it was time to exit.
The CEO Corbat said “Don’t do it” as it was too early to give up on the Asian consumers. But the pandemic has changed everything and the consumer banking in South Korea, Thailand and Australia is under review. Even in India where Citi is the largest foreign bank, it might be spun off. Due to Covid-19, Citi got $17.5 billion credit losses and allowances. A $900 million payment was sent to Revlon Inc.’s lenders shaved off 0.3% point from last year’s 6.9% overall return on tangible common equity, leaving it woefully short of the 14% return at JP Morgan Chase & Co.
The first female CEO of a large Wall Street firm is preparing to make a huge push into wealth management. Fraser’s best bet is Asia. Also, HSBC Holdings Plc, which is scaling back its ambitions in North America and continental Europe, is shifting its focus to the region to take advantage of the same opportunity. Citi has a higher chance of surviving in the aftermath of the pandemic than HSBC. That’s because HSBC’s access to Asia’s wealth isn’t limited to Hong Kong, the bank’s traditional stronghold and the root of most of the bank’s current woes as a result of China’s intrusions into the city’s autonomy.
