June. 22. 2022
Citibank Korea partners with KB, Toss on 8 trillion won loan repayment
|The headquarters of Citibank Korea in Seoul/Yonhap|
By Lee Min-hyung
Citibank Korea has chosen KB Kookmin Bank and Toss Bank to manage its existing debtors while its retail banking operations here undergo a gradual shutdown.
The Korean subsidiary of the American banking group indicated on Wednesday that its retail customers will be able to pay interest and principal on their existing loans to KB and Toss from the beginning of July.
The combined loans extended to Citibank Korea’s retail customers amount to about 8 trillion won ($6.17 billion). The two affiliate banks will be able to attract potential Citi customers by exploiting the loan repayment program.
“Citibank retail customers who have received our unsecured loans can receive benefits – such as discounts on preferential interest rates – by enrolling in the program in the applications or sales offices of both lenders” , said a Citibank Korea spokesperson.
All eyes were on the lender that would attract Citibank Korea’s retail customers at a time when the US Federal Reserve and the Bank of Korea entered a cycle of monetary tightening.
Korea’s central bank has already raised its key rate to 1.75%, pushing up the average interest rate on unsecured loans here. According to data from Korea’s four largest commercial lenders―KB, Shinhan, Hana, and Woori―the average interest rate on unsecured loans ranges from 3.11% to 5.51%. This is an increase of around 0.27 to 0.79 percentage points since the end of 2021.
Last year, Citibank decided to phase out its retail banking business from Korea. Following the group-wide decision, the lender halted all sales of its consumer banking products from February 15 this year.
The US banking group’s Korean subsidiary also began accepting voluntary retirement applications in November, with more than 2,000 employees applying.
This enabled the lender to reduce its expenses by 15.4% in the first quarter of this year compared to the previous year. But the gradual shutdown of the retail banking service ended up weakening the company’s profits over the same period when it posted net profit of 40.1 billion won, down 16.8% from compared to the previous year.
After closing its retail banking unit, the company plans to realign its business portfolio and focus on corporate finance.