Citibank Korea Inc. is following the ill-fated footstep of another major foreign lender HSBC by exiting from locally-dominated retail banking industry by liquidating the business after failing to find a buyer.

Citibank Korea said on Monday that its board last week approved a gradual exit scheme on consumer banking by shuttering banking first, then credit card and lastly wealth management.

The exit by the first foreign bank to set foot in South Korea in 1984 will cost dearly, with compensation for its 2,400 union-backed employees to reach nearly $1 billion.

For smooth pullout, the bank has agreed with the union to handsomely compensate for the loss of jobs.

According to Citibank Korea and its union’s agreement, the bank would pay regular workers, who have been with the bank for three years or more, a special severance payment worth 100 percent of base salary for up to seven years until retirement.

Citibank Korea has 3,500 employees as of the end of June, of which 2,400 are part of retail banking division. It would have to pay out more than 1 trillion won ($858 million) to the redundant workforce in retail banking with maximum severance pay of 700 million won.

The bank had sought to find a buyer for retail banking after the closure was decided by the New York headquarters in April. But candidates were short as few can afford the heavy labor cost in the bank manned mostly by long-term workers and dare to compete in the market against traditional local financial groups and rising online lenders.

The average service year of employees at Citibank Korea’s consumer banking business is 18.4, which is higher than that of other commercial lenders. Their average annual pay is 112 million won ($95,730) as of last year, higher than the average salary for workers at other consumer banks in the country.

Citigroup was the first foreign lender to enter Korean retail finance market in 1984. It acquired local major retail banking Hanmi Bank in 2004. With its exit decision, it will be the second foreign bank to withdraw from the Korean retail market after HSBC that left Korea in 2013.

By Kim Hye-soon, Kim Yoo-shin, and Lee Eun-joo

[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]