The termination of Citigroup’s activities in Russia will not have a significant impact on the banking sector in Russia, said Igor Dodonov, an analyst at FG Finam. He stated this on Thursday, August 25, in an interview with Izvestia.
“Citibank is a relatively small player in the Russian retail banking and SME segment, and I don’t think its departure will have a significant impact on the sector and Russians. The curtailment of business will be gradual, stretched for 1.5 years. All obligations of the bank to customers will be fulfilled, and the assets will be transferred to other credit organizations,” the expert noted.
Speaking about the possible earnings of the company on leaving Russia, Dodonov considered this unlikely, since the bank had already reported costs in connection with the curtailment of the retail business in the amount of $170 million, and over the next 18 months, according to the specialist, something might be compensated by sale of part of loan portfolios.
At the same time, he noted that over the past year the bank has already curtailed its retail business in a number of markets, primarily in Asia, and this was accompanied by significant costs. Russia is unlikely to be an exception, Dodonov said.
Yulia Yakupova, Junior Director for Banking Ratings at Expert RA, in turn, expressed the opinion that Citibank’s departure would lead to a flow of the client base to other credit institutions, but would not have any significant negative impact on the sector.
“Citibank began the process of withdrawing from a part of its business in the Russian Federation, in particular from the retail segment, back in the spring of 2021. Then it was stated that all activities could drag on for several years. But now the situation has changed significantly, many Western companies are interested in a quick sale of Russian business. Therefore, the current value of the transaction will most likely depend, among other things, on how quickly Citibank intends to sell its portfolios,” she stressed.
NRA bank ratings analyst Natalia Bogomolova also added that Citibank’s retail clients should have no reason to worry: banks with foreign capital were leaving the Russian market until 2022, and clients’ funds placed with the bank are protected not only by the DIA, but also quality assets.
She explained that the obligations of customers in relation to the bank (primarily loans) in the event of their transfer to other credit institutions should be serviced on the old terms until repayment. As for outstanding credit limits, they can be adjusted, as well as loyalty programs, cashback and service fees, Bogomolova added.
Earlier in the day, Citigroup announced it was phasing out operations in Russia. As noted in the announcement, Citi will seek to sell some portfolios of the retail business. This quarter, Citi will close 15 branches and lay off more than 2,000 employees. The process will also affect retail services such as consumer loans, credit cards and deposits, brokerage and custody services for individuals.
Citigroup announced its withdrawal from the Russian retail market back in April 2021. At the same time, it was reported that as part of a global strategic renewal, the company would exit customer franchises in 13 markets in Asia, Europe, the Middle East and Africa, as well as in Mexico.
In March 2022, Citi expanded its planned exit from Russia to include Russian SME business. The company discussed the sale of the Russian division with local banks. However, the negotiations became more complicated due to the Russian special operation in Ukraine and the imposed sanctions against the financial industry of the Russian Federation.
According to the company’s plans, it plans to focus its presence on the markets of Singapore, Hong Kong, the United Arab Emirates and London. As noted, this will increase targeted investments in areas where the company’s competitive advantages and capabilities are the largest.
Citigroup is one of the largest international financial conglomerates based on Citibank. It is one of the “big four” US banks. Citi was one of the first international banks to enter the Russian market. The group opened its representative office in Moscow in 1992. At the end of Q2 2022, Citi’s presence in Russia in financial terms was estimated at $8.4 billion.