VTB Interested in Buying the Retail Business of Citibank

VTB got interested in the retail operations of American Citibank’s Russian subsidiary: towards the end of August, VTB sent the bank a non-binding agreement, according to Dmitry Pyanov, a member of the state bank’s board of directors. He went on to say that VTB had yet to get an official answer from Citibank, Vedomosti writes.

“The bank will win the battle for assets because it will be certain of incurring the fewest losses from the transaction,” Pianov said.

According to a VTB senior management, VTB’s estimate of Citibank’s customer turnover is cautious. However, the bank recognizes that this is a particular customer who has the option of switching to another bank.

Citigroup stated in mid-April 2021 that it will leave its retail operations in Russia and 12 other countries. According to the company’s financial report for the first quarter of 2021, the group chose to concentrate its retail operations in four private wealth management centers: Singapore, Hong Kong, the United Arab Emirates, and London. Citi will continue to provide corporate services in Russia.

Citibank has been expanding its retail presence in Russia since 2002, and it currently serves about 500,000 people and 3,000 corporate customers, according to its IFRS 2020 financial statements. Mortgages and vehicle loans are not available through the bank.

At the end of 2020, the portfolio of loans to people totaled 45 billion rubles. Credit cards accounted for 19.5 billion rubles after subtracting reserves, whereas cash loans accounted for 25 billion rubles. In contrast, VTB’s retail portfolio, after deducting reserves, surpasses RUB 3.7 trillion, according to the bank’s six-month IFRS reporting.

Citibank has a high-quality retail portfolio, with credit cards in stages 2 and 3 accounting for 3.6 percent (RUB 741 million) of the portfolio before provisions. Overdue credit cards are protected by a 75% reserve.

Cash loans from stages 2 and 3 account for 4.8 percent (1.28 billion) of the portfolio. They are reserved 76.3 percent of the time. According to VTB’s IFRS reporting for January-June, stage 2 and 3 loans account for 10.3 percent (415 billion rubles) of the retail portfolio before reserves.

Due to the security of information, a Citibank spokesperson informed Vedomosti that they could not comment on the specifics of the retail business transaction. Sovcombank co-owner Sergei Khotimskiy warned reporters in early September that Citibank’s retail division would face stiff competition. He declined to comment on Sovcombank’s interest in purchasing Citi’s business.

According to Interfax, Citibank is ranked 17th in the Russian banking sector in terms of assets (713 billion rubles) and 21st in terms of individuals’ money (162 billion).