SEOUL (Reuters) - Citibank plans to set up a retail-based brokerage unit and a financial holding company in South Korea by 2009 to balance growth between banking and non-banking operations, Citibank Korea’s CEO said on Wednesday.
The wholly-owned unit of Citigroup (C.N) has applied for a license to start a new securities company, which would be separate from its wholesale-focused brokerage operations by Citigroup Global Markets Korea Securities Ltd.
“We would like to specialize the new brokerage company into personal asset management or wealth management services, which would have a minimized risk and would not require a heavy capital,” Ha Yung-ku, head of Citibank Korea, told a news conference.
Kang Shin-won, senior executive vice president of the South Korean unit, said the new brokerage subsidiary would be capitalized at 30 billion won ($29.94 million).
A number of foreign and domestic companies have been awaiting regulatory approval to open securities houses ahead of the 2009 enactment of the Capital Markets Integration Act. The new law is aimed at giving brokerage companies a leading role in reshaping the financial industry.
The South Korean government also has recently loosened regulations governing the formation of holding companies and made it easier for them to make overseas acquisitions as part of an effort to promote the country as a regional financial centre.
Under a holding structure financial firms can leverage their business networks, cross-selling a variety of financial products to group clients, and can also raise funds more cheaply given the generally higher credit rating of a holding firm.
A holding company incorporated by Citibank Korea would control five entities and would not be listed on the Korea Exchange.
The CEO added the bank had no immediate plans to lay off any South Korean employees after it launched a voluntary retirement package late last year, which the bank said involved about 130 staff, or 2 percent of its local workforce.
He again dismissed speculation that the Wall Street bank may put its South Korean unit up for sale, saying South Korea is a priority country for the parent firm.
Citigroup is one of many large banks and brokerages worldwide struggling to raise capital and shed assets after years of ramping up subprime mortgages and other debt that has gone sour.
In South Korea, Asia’s fourth-largest economy, Citibank plans to open more than 10 new branches this year, while CitiFinancial, which serves borrowers with low credit ratings, plans to add more than 15 branches. Citibank Korea posted a net profit of 150 billion won in the quarter ended March, an 8 percent increase from a year ago.
Reporting by Kim Yeon-hee; Editing by Jonathan Hopfner