Citi announced yesterday that it has received approval from the China Banking Regulatory Commission to launch a credit card business in China, making it the first Western bank allowed to issue credit cards in mainland China under its own bank brand. Other multinational banks have co-branded deals, but haven’t been able to go the full monty.
The business will encompass both retail and commercial cards, and is expected to be launched sometime in 2012. “This approval represents a significant milestone in the continued expansion of Citi’s business in China,” said Stephen Bird, chief executive officer of Citi in Asia-Pacific. “Our business in China continues to perform strongly across both institutional and consumer lines, and our ability to introduce a credit and commercial card proposition adds to our healthy growth momentum in this key market.”
Citi is beating the competition to the punch here by being able to offer credit cards in its own name in what is (of course) the world’s fastest-growing credit card market. It is the first non-Asian bank to get such approval — the China unit of Hong-Kong’s Bank of East Asia is the only other foreign bank that has such a credit card operation on the mainland.
One reason why the regulators may have given a green light to the credit cards is that Citi clearly has worked hard with the officials — underscoring its commitment to existing relationships. Citi’s senior management probably took a close look at the bank’s joint venture with Shanghai Pudong Development Bank (SPDB) during the worst of the global financial crisis — when every business sector was scrutinised — but rather than pulling back in China, it has kept skin in the game and stayed committed. That is surely paying off now.
Citi’s Chinese partner will continue to be responsible for the joint credit card venture between the two banks, which started in 2003. “We are proud of the progress made by the cards venture with SPDB since its inception and believe it will continue to succeed,” said Au.
Aside from a smart relationship move (why burn bridges with a JV and annoy the regulators by ditching the Chinese partners as soon as possible?) building both a Citi-branded credit card and a JV-branded credit card business is just one more way to get a piece of a tasty pie.
Au and Bird were the architects behind the effort to push for Citi credit cards in China, but this is just the latest piece of Citi’s China jigsaw puzzle. In January, Citi announced it would establish a joint-venture securities firm in China, together with Orient Securities Company. Citi Orient Securities will be based in Shanghai, and will be able to underwrite and sponsor primary equity and bond issues in China’s domestic market.
On the investment banking front, Citi had a strong year in China last year — it worked on the $1.2 billion Hong Kong IPO for Chinese hypermarket operator SunArt Retail Group and on Qihoo 360 Technology’s $175 million IPO in the US.
As for other savvy commercial bank moves, last year it expanded to three new cities in China and rolled out 12 new “smart banking” consumer outlets, including the first by any bank at an airport in China. Citi also opened its fourth lending company in China, a model designed to provide credit to individuals and small business owners in smaller towns in China.
