이 기사는 2021년 06월 29일 07:49 thebell 에 표출된 기사입니다.

Citibank Korea has allowed potential buyers to conduct due diligence in a virtual data room to offload its consumer banking operations, but the sale is drawing lukewarm response from financial companies probably as the business will be sold through a business transfer rather than a purchase and assumption (P&A) transaction.

“It is said that one large financial holding company seeking to absorb Citi's capable private bankers to expand its wealth management business and a local financial holding company in pursuit of retail assets to secure a base in the metropolitan area are carrying out due diligence,” said an industry source Friday.

The sale is drawing tepid response from financial companies as the retail banking business will be sold through a business transfer. Unlike the P&A method, the business transfer puts a larger burden on an acquirer as it has to take on everything from goodwill to various rights, labor force, and responsibilities.

“We did find Citi’s card business attractive at first,” said an official at a financial holding company. “However, after having discussions with head of our affiliates about whether to participate in the race for Citibank Korea’s consumer banking operations, we have finally decided not to participate.”

“There were many issues to consider as this sale will be carried out in the form of a business transfer,” he added. “It could be worthwhile if it is sold through a P&A transaction, but we thought the business transfer has no significant advantage as it includes goodwill and obligations to guarantee job security.”

The business transfer makes prospective buyers difficult to jump into the race despite Citibank Korea’s strong portfolio of VIP customers. Potential buyers have to take responsibility for all legal risks that may arise during the sale process, and bear risks of possible additional costs incurred after the acquisition.

In contrast, if the business sold through the P&A transaction, the burden on prospective buyers will be significantly reduced because the ownership of an asset will simply be changed. It is a transaction in which a potential buyer purchases assets and assumes liabilities from a seller.

If Citigroup had put more weight on the sale price in its withdrawal from Korea, the P&A transaction would have been more advantageous as it would have attracted a larger number of potential buyers. However, market insiders said the group has chosen the business takeover strategy as it aims at smooth talks with Korean financial authorities.

Citigroup is trying to close its Korean business as soon as possible. To do so, its consultation with the financial authorities has to go smoothly. Under the current law, all mergers, dissolutions, and closures of banks require approval from the Financial Services Commission.

South Korea’s financial regulators reportedly requested Citibank Korea and Citigroup to come up with an exit strategy which will minimize impacts caused by their decision. Accordingly, it is said that Citibank Korea had no choice but to accept the financial authorities’ recommendation and sign a basic agreement with potential buyers, putting more weight on the business transfer.

“Financial authorities won’t likely approve the P&A transaction in which a foreign bank doesn’t bear the burden of job security,” said an industry source. “That is why it is more difficult to obtain approval for closure than approval for banking operations from the financial authorities.”

Market insiders said Citibank Korea CEO Yoo Myung-soon recently suggested its workers take voluntary retirement as an option as the bank has decided to sell its retail banking business through a business transfer transaction.

However, Citigroup may change its exit method to the P&A in the future if it fails to sell its business through the business transfer deal. (Reporting by Hyun-ji Sohn)