Several economists have commented that the Malaysian banking industry will likely remain sound and robust despite Citigroup’s (Citi) exit from the local retail banking scene.
For context, Citi had announced last week that it will be exiting retail banking in 13 markets across two regions, namely Asia as well as Europe, the Middle East, and Africa (EMEA). Malaysia was one of the markets to be impacted by this business decision, which is part of Citi’s strategy to focus on its wealth management segment.
The head of research at MIDF Amanah Investment Bank Berhad, Imran Yassin Md Yusof clarified that Citi’s move in leaving is an isolated case that is attributed to the group’s overall strategy, rather than an industry trend.
“In fact, this may tone down some of the competitive landscape in the sector, but whether this will induce a trend of merger in the industry, we believe that this will not be the case. Also it really depends on the individual banks’ strategy, risk appetite, and assessment of the Malaysian market more than anything else,” he emphasised.
Additionally, the chief economist of Bank Islam Malaysia, Dr Mohd Afzanizam Abdul Rashid commented that Citi’s move was spurred by the need to stay relevant while keeping their economies of scale within a reasonable cost. This is amidst the challenging environment presented by the economic landscape and the regulatory ecosystem.
“The proliferation of technology has allowed a more simplified transaction process with greater amount of security and productivity that really serve the purpose. That way, banks are able to offer tailor-made products based on the customers’ needs, which in this case is wealth management,” explained Dr Afzanizam. He added that the pandemic has revealed both the challenges and opportunities for banks to better serve their customers, and understanding customers’ needs is crucial in helping them to stand out among their competitors.
Furthermore, Dr Afzanizam said that customers these days are more learned, with many seeking advice on assistance to achieve their financial goals. “Therefore, it makes sense to focus on wealth management-related products and services, and having a physical branch may no longer be a prerequisite to serve the clients. I think this would be the key consideration for Citigroup’s decision. It’s about treading a fine line between cost and revenue in the most practical sense,” he clarified.
Meanwhile, the secretary general of the National Union of Bank Employees, J. Solomon, expressed his disapproval at Citi’s exit, claiming that the bank has disregarded its pledge to provide equal access to consumer banking needs for both rural and urban populations. Instead, it operated exclusively in major urban areas to reap hefty profits, and this recent exit is purely a move to focus on the big bucks: corporate Malaysia and wealthy individuals.
Solomon also expressed his regret that Bank Negara Malaysia (BNM) had kept quiet on Citi’s announcement when it should have voiced its displeasure.
“BNM’s silence may prod other multinational banks to do the same down the road, leading to dire consequences for workers and the rakyat. If such banks cannot operate in Malaysia on a long haul, and only see profits as the reason to do business in this country, then Malaysia can do without them,” said Solomon, adding that banks with a history of exiting Malaysia should no longer be offered opportunities to conduct businesses within the country.