CitiFinancial, which took the lead in financing four-wheelers in the country a few years back, has discontinued its auto loan financing activity.
Kickstarting the restructuring of its retail operations, Citigroup has decided to shut down around 280 branches of CitiFinancial in India.
The closure of branches resulted into downsizing of CitiFinancial?s workforce from 3,000 employees to around 2,000 in the current fiscal.
Confirming the development, a senior executive at Citi, said the bank is undertaking restructuring operations of CitiFinancial, which is expected to be hived off as a separate entity in the whole group.
?Except auto, the rest of our retail financial business is very much on,? he said.
Speaking about the future of CitiFinancial in India, the executive said nothing has been decided as yet.
?It is not necessary that we have to go by the developments in the US. We can take an independent decision here about the future of CitiFinancial. The range of options here include getting a partner to run the business,? he said.
The bank is also currently re-locating CitiFinancial branches in certain geographical areas and shutting down outlets in some locations.
On January 16, Citi had announced that it will realign into two businesses, Citicorp and Citi Holdings, to optimise the company?s global businesses and seek profitable opportunities.
Accordingly, Citi Holdings will be made up of brokerage, retail asset management, local consumer finance and a special assets pool ? whose management will focus on tightly managing risks and losses, and maximising the value of these assets.
Citicorp will be a relationship-focused global bank. It will include ?core? Citi properties and have a presence in high-growth emerging markets around the world.
The restructuring of CitiFinancial in India was inevitable due to financial constraints although the bank?s management currently has no plans to exit the consumer finance business.
CitiFinancial posted a net loss of Rs 235 crore as on September 30, 2008, as compared to net profit worth Rs 39 crore on September 30, 2007. Also, the company had registered a 12% decline in its net interest income on account of a shift in its loan portfolio towards lower yielding segments and also owing to a rise in overall funding costs in the current financial year.
An Icra research team has indicated that the overall profitability of CitiFinancial over the short term is likely to remain under pressure as credit losses may remain high until the unsecured portfolio runs down.