Citigroup's China expansion plans face delays over pending US Fed clearance

Citigroup was told to address its data management issues in the US after being fined $136 million in July which has added complications in meeting China's licensing requirements

Citigroup’s plans to expand in China have encountered obstacles with US regulators, as the bank has not yet secured a clearance letter from the US Federal Reserve that verifies its regulatory status — a requirement from Chinese authorities, Bloomberg reported.

The news report noted that Citigroup was told to address its data management issues in the US after being fined $136 million in July. The penalty has added complications in meeting China’s licensing requirements.

Despite these challenges, the New York-based bank remains engaged in discussions with Chinese regulators about setting up the new firm, with no intention to withdraw its application, Bloomberg reported, citing sources familiar with the situation. The circumstances remain fluid and may change, the report said.

 

Citigroup’s financial performance  

Citigroup reported higher profits for the second quarter this year, driven by a 60 per cent surge in investment banking revenue and growth in its services division.

The bank’s net income rose to $3.2 billion, or $1.52 per share, for the quarter ending June 30, compared to $2.9 billion, or $1.33 per share, in the same period the previous year.

Revenue for the quarter was $20.1 billion, a 4 per cent increase year-on-year, helped by a $400 million gain from converting and partially selling Visa stock in May.

Services revenue grew 3 per cent to $4.7 billion, including flat performance in its treasury and trade solutions business, which Citigroup considers its core offering. The division generated $3.4 billion in revenue and handles $5 trillion in daily payments for multinational corporations in 180 countries.

Fined for data management issues

These positive results came after the US regulators had fined Citi $136 million for inadequate progress in addressing data management issues first identified in 2020. Regulators also mandated that the bank dedicate more resources to resolving these problems.

However, the bank had already accounted for the fines and additional investments in the second quarter. Meanwhile, as part of its broader restructuring, Citigroup plans to reduce its workforce by 20,000 over the next two years.