Citigroup is reportedly studying options for divesting retail banking operations in some Asia-Pacific countries that may lead to the departure of Citibank Korea.

South Korea, Thailand, the Philippines and Australia are the markets under review by incoming chief executive officer Jane Fraser, who also sold units in Brazil, Argentina and Colombia after becoming head of the group’s Latin American business in 2015.

The potential cutbacks are part of a strategy by Fraser aimed at simplifying the bank, but are only proposals at this stage. “Nothing has been decided, other than the fact that a review is underway at head office,” a Citibank Korea official said.

Withdrawal speculation has been fueled by Citibank Korea’s deteriorating financial performance. The unit recorded net income of 71 billion won ($63 million) from January to September 2020, down 21% from 90 billion won in the same period a year earlier. Its return on equity dropped to the 2% level in the second quarter of 2020 after remaining above a 3% threshold in the previous five years.

Net income shrunk after then CEO Park Jin-hei decided to streamline the unit’s retail banking by reducing the number of branches from 133 in 2016 to 44 in 2017; it now has only 39 brick-and-mortar branches. The bank’s share of the South Korean loans market declined from 1.9% in 2017 to 1.63% in 2019. It has shifted its focus to corporate banking and wealth management as non-face-to-face transactions rise.

The digital acceleration of the local banking sector has prompted many banks to put more emphasis on technological capability, including fintech and artificial intelligence. However, Citibank Korea has been slow to strengthen its digital platform, which would be one way to attract customers without having physical contacts.

In contrast, rival Standard Chartered (SC) Bank Korea is faring relatively well with digital banking. SC Bank Korea has acquired a 6.67% stake in Toss Bank, the nation’s third internet-only bank.

Standard Chartered created its new virtual bank Mox in Hong Kong earlier this year and acquired a 5% stake in Line Bank in Taiwan. (Reporting by Hyun-ji Son)