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Citigroup announcement sparks hectic week for Costa Rica’s banking sector

October 15, 2014

Citigroup’s announcement on Tuesday that its retail banking business would be leaving Costa Rica prompted a chain reaction of speculation and drama.

On Tuesday morning, the financial group issued a press release announcing the company would scale back its banking operations in 11 countries, including Costa Rica. The company said it was reducing its Global Consumer Banking (BCG) to seek a better profit margin.

That move means the bank will no longer offer retail services in Costa Rica, including personal loans, credit cards and personal savings accounts. Following the change, expected to be completed by next year, the bank will offer account management and loan services exclusively to companies.

At midday Tuesday, Costa Rican Vice President Melvin Jiménez set off a firestorm of speculation during a press conference at Casa Presidecial, where he said Citi’s move would entail the firing of 711 employees here.

Citibank officials responded a few hours later to Jiménez’s comments, with corporate affairs director Lisandra Chaves issuing a public statement indicating that “the adjustments announced this morning do not mean layoffs or the closure of Costa Rican operations.” The statement added that the company in 2015 will sell its BCG section to other local banks. She did not mention which banks.

Jiménez immediately issued a mea culpa in the form of a press release that apologized for the “error.”

“The Presidency Ministry wishes to clarify to the media and to the general public that, based on the official communication made by Citi today, there are no announcements of layoffs. That statement also clarifies that Citi is not leaving Costa Rica, and it will maintain a shared services center and corporative banking business, where they will focus all their efforts,” Jiménez’s statement said.

In May, Citi announced it would invest $35 million in a new services center in Costa Rica. Those plans remain unchanged, the company said.

However, Citi’s exit from the retail banking business will affect 10 other countries, in addition to Costa Rica: Guatemala, El Salvador, Nicaragua, Panama, Peru, Japan, Guam, Hungary, Czech Republic and South Korea.

In other banking news this week, on Monday it was revealed that shareholders of the private bank BanSol had agreed to sell all of their shares to Prival Group, a Panama-based private financial group.

And the state-run Banco Nacional announced it was carrying out “strong adjustment measures” to improve performance. Those measures include the closure of two branches in Alajuela (San Carlos and Grecia) and one in San José, as well as spending cuts, new service fees, the issuance of subordinated debt, dividends collections from subsidiaries, and the partial sale of its loan portfolio, the bank reported.

In April, Bank of America announced it would close its Costa Rica service center by the end of the year, resulting in the loss of 1,500 jobs in the country.

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