Sumitomo Mitsui looks to become Japan’s largest credit
card issuer…

Citi reduces residential mortgage assets in the

NBoG nets a 70% rise in 2007 annual

Insurance comparison site from Lloyds

Sumitomo Mitsui looks to become Japan’s largest credit card

Sumitomo Mitsui Financial Group (SMFG), the third-largest bank
in Japan, has announced its intention to become the largest credit
card issuer in Japan through the merger of three subsidiaries by
April 2009.

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The resultant holding company, comprised of OMC Card, Central
Finance and Quoq, will also include SMFG’s fourth consumer finance
subsidiary, Sumitomo Mitsui Card, which will retain its own brand.
The new company will have an annual credit card transaction volume
of ¥9.5 trillion ($98 billion), a figure in excess of the ¥9.1
trillion dealt with by Mitsubishi UFG Financial Group, the current
market leader.
SMFG currently holds 33 percent of OMC Card, 31 percent of Quoq and
23 percent of Central Finance. The group says that it plans to hold
a 40 to 50 percent stake in the new company, as well as 66 percent
of Sumitomo Mitsui Card, which will ultimately share systems and
processing operations.

HSBC increases its Asia-Pacific presence

HSBC has extended its fast-developing Asia-Pacific business, a
region that accounted for 55 percent of its profit last year (up
from 39.5 percent in 2006). The UK-headquartered group has entered
discussions with China’s Bank of Communications over a joint credit
card company; it has incorporated in Vietnam; and it has released
details of its move into the Korean insurance market following its
purchase of a 49.99 percent stake in South Korean insurer Hana Life
for $58 million in November last year.

In Korea, the insurer has been renamed Hana HSBC Life Insurance,
and the company’s capital has been increased from KRW20 billion
($19.8 million) to KRW50 billion in a bid to aid expansion plans.
Bancassurance partnerships have already been created with Hana
Daetoo Securities, Mirae Asset Securities, Prudential Securities
and Hana Bank, with HSBC looking for further arrangements as it
realigns its distribution network.
HSBC has also received regulatory approval-in-principle to join the
first wave of foreign banks to locally incorporate in Vietnam
(Standard Chartered has as well). It has also entered into
discussions with Bank of Communications (BoCom), China’s
fifth-largest bank by assets in which HSBC has a 19 percent stake,
over establishing a credit card company, according to BoCom
chairman Jiang Chaoliang.

UK’s Big Five suffer but still make solid

Profitability at the big five UK banking groups – HSBC, Royal
Bank of Scotland (RBS), Barclays, HBOS and Lloyds TSB – may have
been impacted by the ongoing credit squeeze in 2007, but aggregated
pre-tax profits for the five still amounted to £38.6 billion ($77.7
billion), up slightly from £37.4 billion in 2006.

Pre-tax profit fell by 1 percent at Barclays to £7.08 billion,
while Lloyds TSB saw a 6 percent fall, down to £4 billion. But RBS
reported a 7.8 percent increase to £9.9 billion, with pre-tax
profits at HSBC up by 9.6 percent to £12.1 billion despite
significant write-downs – loan impairment charges and other credit
risk provisions for HSBC were £8.55 billion in 2007.

Lloyds TSB reported strong performance in its UK retail banking
business, however, with an 8 percent deposit growth contributing to
a 17 percent increase in adjusted profit, which stood at £1.81
billion. RBS also performed well in retail, with operating profit
rising by 10 percent to £2.47 billion. At Barclays, pre-tax UK
retail banking profits rose by 9 percent to £1.28 billion but
international retail and commercial banking saw profit fall 5
percent after disposals. HBOS, meanwhile, saw a 13 percent drop in
underlying retail profits.

Citi reduces residential mortgage assets in the

Citi has announced a reorganisation plan that will see it reduce
its US residential mortgage assets by $45 billion over the next 12
months, a 20 percent annual decrease that will be accompanied by a
50 percent decrease in the amount of new loans it holds.

The realignment comes as part of CEO Vikram Pandit’s wider
scheme to streamline Citi and focus on operational efficiencies,
moves which the financial services group expects to reduce expenses
by $200 million by March 2009.

Citi Home Equity, Citi Residential Lending and CitiMortgage will
now all be integrated under the CitiMortgage name as part of the
plans. The company will also reduce higher risk product offerings
such as mortgage loans for investment properties on three and
four-bed family homes. A planned increase in the proportion of
loans being sold to agencies or securitised, up from 65 percent in
2007 to 90 percent by the third quarter of 2008, is aimed at
further minimising risk by reducing capital and credit

Indian central bank tells banks to cut ATM charges to spur

The Reserve Bank of India (RBI) has announced that,
following a consultation with the country’s banks, customers will
be able to withdraw money from ATMs free of charge from April 2009
as part of a series of measures aimed at improving India’s ATM
services. As of the end of December last year, the number of ATMs
deployed in India was 32,342, said the RBI, and the
channel is becoming increasingly central to the way many banks
distribute services in the country.

The central bank has said that customers will be able to
withdraw money at their own bank’s ATMs free of charge, effective
immediately. Customers will also be able to make balance enquiries
on other banks’ machines at no additional cost.

The staggered introduction means that no bank will be able to
raise existing charges in the 12 months to the 1 April 2009
introduction date. A maximum charge of INR20 ($0.50) per
transaction will also be enforced from 31 March 2008 to 1 April
2009. It added that charges for overseas ATMs or for using credit
cards to withdraw money at ATMs will remain discretionary.

Mergers and acquisitions
BNP Paribas rules out bid for Société Générale

BNP Paribas has confirmed that it will not be making a bid for
French rival Société Générale. “Given the persistent rumours, BNP
Paribas clarifies that it has ceased to consider a potential tie-up
with Société Générale,” the bank said in a statement. “[The bank] believes that the conditions, which would have allowed it to
realise a shareholder value creating merger, are not met.”

Despite losing €4.9 billion ($7.7 billion) in what it called an
“exceptional fraud”, Société Générale still managed to make a €947
million profit last year. The bank has always stressed it wants to
remain independent and possible bidders such as BNP Paribas, Crédit
Agricole, BBVA and HSBC have not shown much interest.

BNP Paribas added: “In the current environment, BNP Paribas’s
priority is to recognise and play to our strengths: stringent risk
management, solid financial structure, commercial efficiency,
diversification of revenue sources. The group is well positioned to
continue its development by combining its expertise in retail
banking (over 50 percent of revenues), corporate and investment
banking, and asset management. BNP Paribas is well placed to
continue to support its customers and economic development.”

NBoG nets a 70% rise in 2007 annual profit

An expanding south-east European franchise has helped National
Bank of Greece (NBoG) post an impressive 70 percent rise in 2007
annual profit to €1.68 billion ($2.65 billion). Net profit from
Finansbank, the successful Turkish subsidiary it acquired in 2006,
rose from €87 million to €448 million. Retail lending at
Finansbank, Turkey’s fifth-largest bank, grew 65 percent to TRY7.1
billion ($5.76 billion) while the bank’s total loan book increased
41 percent to TRY18 billion. NBoG added 101 branches to the
franchise last year, bringing Finansbank’s network to 410

In Greece, total retail lending was up 19 percent to €25.7 billion.
New mortgages were up 13 percent to €4 billion while consumer
lending and credit cards totalled €5.7 billion, up 20 percent. The
number of new credit cards and revolving credit accounts grew by 40

Retail lending in its south-east European franchise, which includes
Romania, Bulgaria, Serbia and Albania, increased 68 percent to €2.7
billion. NBoG now has 655 branches across the region and almost
9,000 staff.

ING updates its Dutch retail banking plans

ING has given an update on its plans for its Dutch business
following the initial announcement last year of a five-year, €890
million project to transform its domestic operation by merging ING
Bank and Postbank into one and focusing on developing the combined
branch networks (see RBI 587, 572).

Postbank services currently offered in 250 main post offices
will be transferred to 283 modern, full-service ING branches. In
addition, ING will extend access of its 550 Postbank outlets
located in shops to ING Bank’s customer base. To further increase
customer proximity and the quality of services, ING will have more
branches close to shopping centres and extend the opening hours to
after office hours in the coming years.

Bad investments dent French banking results

Unlike BNP Paribas, which reported record results for 2007
(see RBI 587), Crédit Agricole and Société Générale
announced relatively downbeat group results – despite good
performances from their respective retail banking divisions.

Crédit Agricole generated net income of €4.04 billion, a 16.8
percent decline year-on-year, due largely to the international
financial crisis. Excluding the subprime impact, net banking income
would have risen by 25.5 percent and gross operating income would
have increased by 30.5 percent. Crédit Agricole was also bullish
about its growing European and North African retail banking empire
– last year, Italy became the group’s second-largest market while
its Emporiki Greek subsidiary shows strong growth prospects in
Greece and the Balkans.

Its consumer finance business had a positive year too: total
consumer finance production came to €32.1 billion, up 28.3 percent
on 2006. On a like-for-like basis, non-French credit outstandings
rose by 35 percent.

The €4.9 billion trading scandal dragged Société Générale’s
annual profits down 81.9 percent to €947 million. While the group’s
overall net banking income for 2007 was down 2.8 percent, net
income for its French Retail Banking division was up 4.8 percent
and up 17.1 percent at its International Retail Banking unit. Net
banking income in Central and Eastern Europe increased 17.3
percent, 58.3 percent in Russia (see The gold rush into
), 6 percent in Africa and French Overseas Territories,
and 19.3 percent in the Mediterranean Basin.

Substantial mortgage growth for Bank Leumi

Leumi Mortgage Bank, the mortgage unit of Israel’s largest
financial services group, Bank Leumi, recorded an increase in net
earnings of 342 percent in 2007, from ILS50 million ($14.76
million) to ILS219 million. During the fourth quarter, net earnings
were ILS28 million, a year-on-year increase of 629 percent. In
total for the year, mortgage advances totalled ILS35.8 billion, an
increase of 8.3 percent.

Leumi Mortgage Bank’s CEO, Yuval Gavish, said the bank’s
impressive growth rates indicate the success of the services
procedure that the bank adopted over the past year. “The new
products that we introduced and the facilitating procedures – for
example, the No Run Around service, through which the required
documents are delivered to the Mortgage Registry and to the
seller’s attorney – are the features that resulted in an increased
market share, increased customer satisfaction and the sharp growth
in the bank’s business performances.”

Citi and SK Telecom in global m-banking deal

Citi has set up a San Francisco-based m-banking joint venture
with South Korea’s largest telecoms provider, SK Telecom. The aim
of the new company, Mobile Money Ventures, is to “develop mobile
financial services and technologies that will deliver greater
functionality, speed, and convenience to consumers around the
world”, according to a statement.

By leveraging SK Telecom’s expertise in the tech-savvy Korean
mobile market, with services such as Moneta and M-bank, and Citi’s
products, global marketing capabilities and vast customer base,
Mobile Money Ventures will look to provide the most advanced mobile
financial services available. New features will include mobile
phone ‘tap’-based payments using contactless technology, budget
planning and tracking, expense management and location-based
advertisements and discounts.

The two companies expect to test Mobile Money Ventures with Citi
customers in select markets in the second half of 2008. SK Telecom
says it sees “great potential for the telecommunications and mobile
payments market around the world. Currently, only simple mobile
finance features such as balance management and payment services
are offered in many markets.”

Insurance comparison site from Lloyds TSB

The UK’s fifth-largest retail player, Lloyds TSB, has become the
first UK bank to launch an insurance price comparison website. The
site,, searches for policies based on a number of
different factors including the cover consumers need and the level
of service offered. Consumers can search for motor insurance
policies from over 35 firms, including niche providers – though one
of the largest UK retail insurers, Royal Bank of Scotland’s Direct
Line, is not featured.

The launch by Lloyds TSB comes at a time of near-saturation in
the UK financial comparison site market. There are now ten such
sites catering for the financial market, including a recent launch
from the UK’s largest retail chain, Tesco. UK insurance group
Admiral, which operates the biggest insurance comparison site,, recently said it was expecting the site’s overall
market share to fall below 50 percent in 2008 on the back of
increased competition.