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Citigroup (NYSE:C) may cut up to a fifth of its 450 branches in India. Additionally, Citigroup may even move some of its ATM branches to less expensive locations.

One of the big benefits that Citigroup has in India is its brand name that comes from being a global behemoth. All of the subprime news, and cost cutting could negatively affect its brand name in India. Moving away from expensive locations will also affect Citi’s brand.

Now this could be a good opportunity for domestics banks such as ICICI Bank (NYSE:IBN) and HDFC Bank (NYSE:HDB). It kind of levels the playing field for domestic banks a little when competing with foreign banks. The move also coincides with ICICI Bank's opening of a branch in New York in Citi’s home turf. HSBC (HBC) seems to have already moved its ATMs to less expensive locations. Check out the following excerpt from a blog by John Elliott at Fortune (July, 2007):

HSBC seems to be finding it hard to survive in India’s increasingly costly bazaars. Almost unbelievably, the world’s fourth-largest bank has closed its ATM booth in central Delhi’s prestigious Khan Market because, senior executives tell me, it does not consider it economically viable to pay the admittedly astronomical six lakhs of rupees ($15,000) rent a month that its landlord wants for the 150 square feet of potential retail space. It is moving its money machine, and its usually sleepy guard, to cheaper location, possibly in a nearby gas station that will be far less accessible for local shoppers and tourists who used the old ATM. The bank’s customers can still use their cards to withdraw cash at a (rather luxurious) Citibank ATM just a few yards away from the former HSBC location, at no extra cost.

You can’t blame Citigroup for not paying these crazy prices during struggling times.

On a side note, Citigroup has a 9.27% stake in HDFC, and HDFC also has a 21.99% stake in HDFC Bank. In the past, there have also been claims that once liberalization in the banking sector takes place in 2009, Citigroup would eventually buyout both HDFC and HDFC Bank.

Full Disclosure: No position in any of the above listed stocks.

Source: Indian Domestic Banks Could Benefit from Citigroup's Cost Cutting Measures