Citigroup Korea to exit consumer lending

Citigroup Korea is dropping its consumer lending unit ― Citigroup Capital Korea ― in a bid to streamline operations, the banking giant said in its third-quarter earnings report on Tuesday.

The announcement, however, will not affect Citigroup’s core businesses that include retail banking, credit cards and corporate banking, the company spokesman said in an emailed statement. It also does not indicate that Citibank Korea is pulling out, he added.

“Korea will always be one of Citi’s most important markets globally. We make it clear once again that there are no plans to exit any of our core businesses in Korea, and our success in Korea is crucial to the success of our company,” the spokesman said.

The sales process is expected to be wrapped up by the end of next year.

“However, there could be some flexibility in this deadline, as several capital companies are on the selling block,” a Citibank Korea spokesman told The Korea Herald.

Citigroup is planning to sell its consumer banking business units in 10 more countries by the end of 2015, including Costa Rica, El Salvador, Guam, Guatemala, Hungary, Nicaragua and Panama, the group said its report.

Analysts believe that in Korea, falling profits, tougher government regulations and less-than satisfactory labor relations were the main reasons behind Citigroup’s decision to sell Citigroup Capital.

South Korea is widely known as a difficult market for foreign financial institutions. In August, Standard Chartered called South Korea the bank’s most difficult market and “a source of bad debts,” after the country’s personal debt rehabilitation plan drove up impairments on loan losses.

Citigroup Korea has also been at the center of several controversies, including a data leak and a move to lay off up to 650 of 4,200 employees.

These moves had fueled rumors that the banking giant was devising a departure from Korea. The speculation gained more momentum when Citigroup Korea chairman Citibank Korea CEO Ha Yung-ku recently announced that he would step down to join the race for chairman of KB Financial Group.

By Suk Gee-hyun (monicasuk@heraldcorp.com)