Sumitomo Mitsui Banking Corp (SMBC) will be acquiring Citigroup Inc’s Japanese retail banking operations for an undisclosed amount. Retail banking refers to the provision of services to members of the public.
The deal is part of Citigroup’s plan to shed off the unprofitable businesses that it operates around the world.
Although the acquisition price has not been made public yet, sources familiar with the matter told Reuters that SMBC, a unit of Sumitomo Mitsui Financial Group Inc, is buying the business for around 40 billion yen ($333 million).
Citibank Japan CEO Peter Eliot in a statement:
“This is a positive outcome for Citi, as well as for the employees and customers of our retail banking business in Japan. This decision furthers Citi’s global strategy of focusing our resources where we feel we have a competitive advantage, which includes our Institutional Clients Group businesses in Japan. Citi has been in Japan since 1902 and it is an important market for Citi.”
Citibank Japan customers will still have access to Citi’s global ATM network after the SMBC acquisition.
According to a joint statement by the two companies:
“The entire retail banking operations of Citibank Japan Ltd., including its Japan-wide network of retail branches and ATMs, will be transferred to a trust bank subsidiary of SMBC as part of the transaction, together with approximately 1,600 Citi Japan employees, about 740,000 customer accounts and approximately JPY2.5 trillion (US$21.0 billion at an exchange rate of 118.15 yen to US$1.00) of yen and foreign currency deposits as of November 30, 2014.”
SMBC said that the affluent Japanese customer base that Citigroup has in Japan is very attractive.
SMBC Senior Managing Director Nobuaki Kurumatani told reporters at a briefing that “its customer base is different from that of Japanese banks,” adding that Citibank Japan’s 1 trillion yen worth of foreign-currency deposits from customers is valuable for SMBC to expand lending overseas.
The deal is expected to be complete by October 2015. It is still subject to regulatory approvals though.
In October Citigroup announced that it would be pulling out of 11 markets as a means of cutting costs. Its Japanese consumer banking business has been negatively impacted by falling demand and a drop in interest margins.