Exclusive: Citigroup China consumer wealth business will be purchased by HSBC

According to two sources with knowledge of the situation, HSBC (HSBA.L) is about to acquire Citigroup’s (C.N) China consumer wealth management unit, which oversees more than $3 billion in assets. This will significantly expand the London-based bank’s operations in China.

One of the sources reportedly stated that “a few hundreds” of Citi’s employees who work in China will be transferred to Asia-focused HSBC as part of the transaction, the financial terms of which were not immediately disclosed.

The two sources, who asked to remain anonymous because they were not authorized to speak to the media, claimed that the agreement may be revealed as early as next month.

Citi and HSBC chose not to comment.

As the largest lender in Europe pledges to leave less lucrative regions in order to concentrate on Asia, its main source of revenue, the acquisition adds to a litany of steps taken by HSBC to develop in China, one of its core markets.

With fewer banks expanding their presence in response to sluggish economic development and new national security limitations on data transfers, the appetite of Western corporations to conduct business in China has been reduced.

However, a “ice-breaking” spirit used historically by British enterprises, according to a bank statement, would enable the UK and China overcome obstacles and geopolitical difficulties, as HSBC Chairman Mark Tucker told Beijing authorities in July.

The bank, which already provides wealth management and private banking services on the domestic market, received a unique qualification for fund distribution granted to a foreign company earlier this month, opening up new potential in China’s $3.94 trillion ($28.8 trillion) fund market.

According to the second source, HSBC intends to use its network of insurance brokers to start selling funds to affluent Chinese customers as early as next month.

With deposit, fund, and structured product products, Citi’s China wealth management operations, which are a part of the retail banking industry it has been planning to exit since 2021, primarily cater to wealthy clientele in the second-largest economy in the world.

With more retail outlets handling wealth management than it does, Chinese and global competitors like Standard Chartered dwarf its $3 billion in consumer assets under management.

According to the first source, the bank’s private banking services, which serve high net worth Chinese clients from places outside of China, are still available. Citi is now submitting an application to open a securities brokerage business in China.

As part of a strategy to exit consumer franchises in 14 regions throughout Asia, Europe, the Middle East, Africa, and Mexico, Citi announced in December that it was looking to sell some of its portfolios as it shut down its China retail banking operation.

Citi is in the midst of shutting down its South Korean unit in Asia, and it intends to finish handing over its Indonesian operations to UOB Group. It finished selling and relocating its Taiwan consumer businesses in August.