Local Banks, Hsbc May Vie For Stake

The Age

Thursday January 15, 2009

ERIC JOHNSTON

MAJOR Australian banks and offshore giant HSBC could emerge as key contenders for Citigroup's Australian consumer financing business if the global banking giant decides to put its credit-card-to-personal-lending unit on the block.

Such a move would mark a major reversal of strategy for Citigroup in Australia, given the banking giant has been among the most aggressive in the consumer banking space in recent years.

Citigroup has so far declined to comment on the speculation of a sale, which, if it were to happen, would reduce the size of the US bank's assets by a third.

"When you look at their global operations over the past two decades, consumer lending has been the spine of the business," one analyst said yesterday.

In most markets, with the exception of Australia, Citigroup ranks among the top three in the consumer financing area. Locally, Citigroup is the fifth-biggest provider of credit cards, behind the big banks, and operates the credit card portfolios of Suncorp Metway and Bank of Queensland.

Still, confirmation yesterday of the US$13billion ($A19billion) global retail broking joint venture with Morgan Stanley should put to rest speculation about any sale of the Australian wealth management business, local Citigroup executives said.

"It removes that uncertainty - it creates a very powerful retail distribution platform for both institutions in Australia," Citigroup Australia chief executive officer Stephen Roberts said.

He said the institutional broking businesses of Citigroup and Morgan Stanley would have unfettered access to the Smith Barney retail broking network, which has about 230 advisers.

The joint venture is regarded as complementary in Australia, given Morgan Stanley does not operate a retail network.

In Australia, Smith Barney accounts for less than 10per cent of Citigroup's total Australian earnings, although Mr Roberts said it remained an important component of the entire business.

Last year it was ranked outside the top 20 in terms of volume, with Citigroup's institutional arm coming in at third place.

Morgan Stanley co-president James Gorman, who will head the global broking business, said it was too early to discuss job cuts.

"This is a growth story. We believe this is a business that will take market share," the Australian-born Mr Gorman said.

© 2009 The Age

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