Citigroup’s India cost cutting could benefit domestic banks
Citigroup (C) may cut up to a fifth of its 450 branches in India. Moreover, Citigroup may move some of it’s ATM branches to less expensive locations.
One of the big benefits that Citigroup has in India is its brand name that comes from being a global behemoth. All the sub-prime news and cost cutting could affect it’s brand name negatively in India. Moving away from expensive locations certainly will also affect Citi’s brand.
Now this could be a good opportunity for domestics banks such as ICICI Bank (IBN) and HDFC Bank (HDB). It sort of levels
the playing field for domestic banks a little when competing with foreign banks. The move also coincides with ICICI Bank opening a branch in New York in Citi’s home turf.
HSBC (HBC) seems to have already moved their ATM’s to less expensive locations. Check out the following excerpt from a blog by John Elliott at Fortune (July, 07):
HSBC seems to be finding it hard to survive in India’s increasingly costly bazaars. Almost unbelievably, the world’s fourth-largest bank has closed its ATM booth in central Delhi’s prestigious Khan Market because, senior executives tell me, it does not consider it economically viable to pay the admittedly astronomical six lakhs of rupees ($15,000) rent a month that its landlord wants for the 150 square feet of potential retail space. It is moving its money machine, and its usually sleepy guard, to cheaper location, possibly in a nearby gas station that will be far less accessible for local shoppers and tourists who used the old ATM. The bank’s customers can still use their cards to withdraw cash at a (rather luxurious) Citibank ATM just a few yards away from the former HSBC location, at no extra cost.
Can’t blame Citigroup for not paying these crazy prices during struggling times.
On a side note, Citigroup has a 9.27% stake in HDFC. Also, HDFC has a 21.99% stake in HDFC Bank (HDB). There have also been claims in the past that Citigroup will eventually buyout both HDFC and HDFC Bank after 2009, once liberalization occurs in the banking sector.
Full Disclosure: No position in any of the above listed stocks.
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