Citigroup, as a part of its global strategy to focus its resources in the correct direction has reached an agreement to sell its retail banking business in Japan to Sumitomo Mitsui Banking Corp (SMBC) for an undisclosed amount.
Though the acquisition price is not disclosed, Reuters reported it to be 40 billion yen (USD 333 million). SMBC will acquire Citibank Japan’s operations, 1600 employees and 32 branches across major cities in Japan and merge it with its retail banking arm, Sumitomo Mitsui Trust Banking (the same arm that made investment in Reliance Capital recently). The deal also includes 740,000 customer accounts and 2.5 trillion Yen worth foreign and domestic currency accounts.
Even after the deal, Citibank’s customers will have access to the global A.T.M network of the bank which would be a major concern of the customers. Citibank is the largest foreign bank in Japan and has been operational since 1902. The decision to close its operations in the retail banking comes partly from the tough banking environment in Japan with meagre interest margins and heavy competition.
Sumitomo said in a statement that Citibank’s affluent Japanese customer base is an attractive one and it’s very different from that of Japanese banks. Sumitomo’s Senior managing director, Nobuaki Kurumatani added that Citibank’s 1 trillion Yen worth foreign currency deposits from its customers will play an invaluable role in SMBC Trust bank’s aggressive expansion into overseas lending where there is a need for more stable dollar funding sources.
Citigroup said in a statement that its consumer banking business is hurt badly by the low demand in loans and the falling interest margins. Citigroup hopes to utilize its resources and the money made through the deals in strengthening its businesses where it has a competitive advantage.