CitiFinancial reduces asset book by a third

Branch network is now a quarter of the year-ago level.

CitiFinancial, Citibank India's non-banking finance arm, has reduced its asset book by one-third and its branch network by a quarter of the year-ago level as part of a restructuring exercise, Citi CEO for South Asia Mark T Robinson told Business Standard.

CitiFinancial had an asset book of around Rs 8,600 crore at the end of the last financial year, against nearly Rs 13,000 crore at the end of March 2008.

Part of the reason was the go-slow on lending, which was less than the repayments it received from borrowers. In addition, the NBFC has written off and sold some of its assets, though a detailed break-up of the components was not available.

Similarly, CitiFinancial’s branch presence has dropped from 450 locations a year ago to 118 now, said Robinson, who took charge of the financial services company’s South Asian operations earlier this year.

Citi was forced to restructure its operations, which included a capital infusion of $200 million, or around Rs 950 crore at the prevailing exchange rate, due to a high level of defaults.

The Indian consumer loan portfolio has amongst the highest delinquency levels among Citi’s global operations. At the end of the March quarter, the net credit loss (NCL) ratio for Citi’s India business was estimated at 7.1 per cent against 6.3 per cent in the fourth quarter of 2008.

Citi estimated its NCL from the international consumer credit business — comprising cards and consumer banking — at $1.7 billion against $1.8 billion at the end of the December quarter. Of this, India’s share in the first quarter NCL was estimated at 8 per cent, or $136 million (around Rs 650 crore), as against 7.8 per cent, or $124.8 million (around Rs 600 crore) in the previous quarter.

Robinson said the delinquency level had increased because many customers were over-leveraged, a trend that could not be spotted owing to the absence of credit information bureaus and the impact of the economic slowdown.

Robinson, however, said losses in the consumer finance space peaked several quarters ago and were coming down. "In credit cards, we are seeing the peak now and expect credit performance to begin to turn around soon," he said.

Citi’s earlier attempts to divest the NBFC did not materialise due to the low valuations that were offered. Asked if the proposal was still on the table, Robinson said, “Like any company in Citi Holdings, over time, if there are ways we can realise value, we will look at them but in the meantime we continue to invest and manage that business.”

In recent months, CitiFinancial has tightened norms for sanctioning fresh loans to ensure that its portfolio stayed robust.

Robinson said the risk and credit management processes had been centralised and the company was not only offering loans to customers but also cross-selling insurance and other investments.