Citigroup heads for the retail exit in Hungary and Czech Republic

By bne IntelliNews October 15, 2014

bne -

 

Citigroup will quit 11 small markets for retail banking, the US banking giant announced on October 14, including Hungary and the Czech Republic. The sizeable retail operation in the former - which has little exposure to forex debt - is likely in particular to whip up interest. 

Citigroup called the move "strategic action … to accelerate the transformation of Global Consumer Banking (GCB) by focusing on those markets where it has the greatest scale and growth potential".

Aside from Japan, the territories the US bank will exit are for the most part small emerging markets.  Alongside the Czech Republic and Hungary, it will divest consumer franchises in Costa Rica, Egypt, El Salvador, Guam, Guatemala, Nicaragua, Panama and Peru, as well as the consumer finance business in Korea.

"Active sales processes are underway for the majority of the businesses, and subject to market conditions and regulatory and other approvals," Citigroup said in a statement. "[T]he strategic actions are currently expected to be substantially completed by year-end 2015."

In Central Europe, it is notable that Citi won't be giving up its foothold in the Polish market, despite its local unit Bank Handlowy lying outside the top three in terms of market share. 

Lining up

In Hungary, because of the rough treatment handed out to the banks from the government since Prime Minister Viktor Orban took office in 2010, bank valuations have plunged. Battered by high sectoral taxes and the forex relief scheme, some banks have looked at leaving but found interest only from the state, or close friends of the government. That has pushed foreign owners to restate their commitment to the market. Meanwhile, Orban - who has called for greater domestic ownership of the banks - and his close colleagues at the central bank continue to predict an exodus.

However, despite closing three of its branches to leave it with just 10 last month, Citibank Magyarorszag is one of the better performing banks in Hungary, according to Protfolio.hu. In particular, its low loan exposure looks attractive right now given the uncertainty on the market, while deposits are also healthy.

One of the largest players in Hungarian private banking - Citi managed the sixth largest asset portfolio and had the second-largest number of accounts, according to a recent survey - Citi should have little trouble offloading the unit, suggested Portfolio's analysts, despite the PM having reiterated this week that he wants "bring the banks to account". 

Most of the universal banks in Hungary would be interested, they suggest. They add that market sources claim several potential buyers are already queuing up. 

Dull and simple

However, given the market's reputation for stability and dullness, divestment will likely prove more straightforward in the Czech Republic. Citibank has just 10,000 clients, focussed on  premium personal banking services, with credit cards another major plank of the business. 

Business daily Hospodarske Noviny noted that fellow global giant HSBC gave up on the Czech retail market some years ago after selling its similar-focussed operation to Erste. The business is now run by the Austrian bank's local arm - and the largest Czech retail bank - Ceske Sporitelna as a premium service.

"Currently, preparations are underway for the sale," said a Citibank Czech Republic spokeswoman. A deal should "be largely completed by the end of 2015”.
 
Ceske Sporitelna, Komercni Banka and Sberbank are all open to look at any potential acquisition in the Czech Republic, spokespeople told Aktualne.cz. However, they were all also quick to point out that it is too early for further comment. 

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