이 기사는 2021년 05월 21일 07:16 thebell 에 표출된 기사입니다.

Citibank Korea, the South Korean unit of Citigroup, has put its efforts to cut costs ahead of the sale of its retail banking operations, but the effect was limited due to a sharp decrease in its gross profit.

The bank recorded net income of 48.2 billion won ($42.5 million) in the first quarter, down 19.4% from 59.8 billion won in the same period last year, according to the bank’s earnings report.

It put utmost efforts to cut costs, but they had limited impact on improving its earnings. Its net income decreased even after the bank reduced its expenses, reserves, and corporate taxes by 4.8%, 40.1%, and 15.4%, respectively.

In particular, Citibank Korea sharply reduced its marketing costs and overseas affiliates' service costs under the expenditure section (201.3 billion won) during the period. The bank had a high level of spending on selling, general and administrative (SG&A) and heavy bad debt burdens. It has spent 700 billion won to 800 billion won on SG&A expenses every year.

It is seen that the bank has failed to reduce its overall cost due to increased labor costs. Expenditures spent in the first quarter stood at 201.3 billion won, a slight decrease from 211.5 billion won in the same period last year.

A large decrease in its gross profit had a negative impact on its net income. Citibank Korea recorded gross profit of 290 billion won in the first quarter, a 12.4% decrease from 330.9 billion won year-on-year. This is due to a prolonged low interest rate and decreased credit card spending despite its solid wealth management business.

The bank’s return on assets and return on equity recorded 0.39% and 3.08%, respectively, down 0.06 percentage points and 0.80 percentage points year-on-year.

The cost-income ratio, which measures management efficiency, also increased from 63.9% to 69%, compared to the industry average of around 40%.

Citibank Korea has enjoyed higher net interest margin (NIM) compared to other lenders thanks to its household credit loan and credit card-oriented business structure.

However, the gap between Citibank Korea’s NIM (excluding credit card business) and other commercial banks have narrowed from 40bp to 20bp since the second half of 2020, signaling deteriorating profitability.

Citibank Korea’s growth has slowed down as well, with household loans provided by the lender standing at 11.9 trillion won in 2016, 11.7 trillion won in 2017, 11.3 trillion won in 2018, 11.6 trillion won and 12.6 trillion won in 2020. (Reporting by Hyun-ji Sohn)