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Rob Dwyer
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Citi has confirmed it is to exit retail banking in Brazil, Colombia and Argentina in a further round of retrenchment from the region – with these latest three joining six other regional businesses sold in the past two years.
Citi has confirmed it is to exit retail banking in Brazil, Colombia and Argentina in a further round of retrenchment from the region – with these latest three joining six other regional businesses sold in the past two years.
The concentration of Brazil’s banking market was further illustrated shortly before Citi’s decision when a consortium of Banco do Brasil, Bradesco, Caixa Economica, Itaú and Santander announced the creation of a credit intelligence bureau to pool credit information. That move was preceded by a ruling from the state of Sao Paulo constraining credit agency Serasa Experian from reporting on a large amount of delinquency data.
“The ruling in effect means that Serasa can only report 3% of NPLs in the state – which accounts for 30% of the country’s credit market,”says Sergio Furio, founder and chief executive of BankFacil, a financial services start-up that helps consumers searching for financial products. “That decision will reduce transparency and increase the price of credit in the country’s largest market.”
Limitations
The leading banks’ decision to pool information between themselves for a period of four years further limits the competitive position for smaller banks, as well as making it difficult for companies with consumer finance operations. The concentration of pricing power is often cited as one of the main reasons why international banks have been unable to compete effectively with the dominant local banks.
According to Furio, Citi’s departure in Brazil also stems from the bank’s strategic error. “Citi has been trying to target the mass-affluent sector in Brazil, and frankly this failed – as seen with its recent sale of its credit card division to Itaú,” he says. “This also damaged the brand for potential wealth management clients, and the bank was unable to build a profitable business in either segment.”
It is unclear who will be favourite to buy Citi’s 71-strong franchise of retail banks but Bradesco is likely to be preoccupied with its acquisition of HSBC.