The Hindu Business Line : Indian operations a drag on Citigroup income

Mumbai, April 18 Citigroup Inc, which reported a first quarter loss of $5.1 billion on Friday, said its Indian operations suffered higher credit costs — provisions against bad debt and write offs — and increased recovery costs.

The world’s largest financial services provider said that under its international consumer finance business (excluding Japan), “the net loss of $99 million mainly was due to an increase in credit costs of 92 per cent, primarily driven by India, and a repositioning charge.”

The Indian operations contributed to the decline in Citigroup’s net income from Asia.

“The decline in net income reflected higher expenses associated with increased collection efforts, primarily in India, and branch openings, as well as higher credit costs in India consumer finance,” said a press release from the company.

Citigroup has seen a $3.1-billion increase in credit costs in its global consumer banking business. The company’s non-US consumer banking businesses suffered higher credit costs, which reflected an increase in net credit losses of $461 million. This was primarily driven by the increase in credit costs of its Indian consumer finance operations, Mexican card business as well as by acquisitions and portfolio growth, said the statement from the company.

In the quarter ended December 2007 too, the bank’s Indian operations had seen an increase in net credit loss ratio.

Sources said Citigroup India’s Non-Banking Finance Company arm, Citifinancial, had seen higher non-performing assets in the quarter ended March 2008, which accounted for the higher credit costs seen in India.

The NBFC, which has more than 400 branches, also incurred higher branch expansion costs. It has a presence in 175 cities in the country.

Citigroup India currently has 39 branches in 27 locations and has licences for three more branches.

Incidentally, Citigroup Inc is headed by India-born Mr Vikram Pandit, who took charge in December 2007 after Mr Charles Prince stepped down following huge investment losses made by the group.