Citigroup to Vend Greek Consumer Banking Business
In yet another move towards streamlining its international operations, Citigroup Inc. (C) inked a deal with Greece based Alpha Bank to sell its Greece consumer banking business and Diners Club of Greece SA credit card operations. The deal is expected to close in third-quarter 2014.
As per the deal, Citigroup will offload GAAP assets of around $600 million, deposits of $1.4 billion, card & loan balance of $540 million and customer base of 480,000. Further, around 730 employees of the consumer banking business along with Citigroup’s branch and ATM network in Greece will move into Alpha bank.
While Citigroup sheds its retail business, it proposes to concentrate on boosting its institutional client’s portfolio in Greece – including Greek corporations, financial companies, and private bank and public sector clients.
As Citigroup has presence in numerous markets globally, CEO Michael Corbat has planned to restructure, reduce or exit some of the operations in 21 global markets to enhance returns. But the company aims to operate in markets where it has advantage over peers.
In Apr 2014, Citigroup announced the sale of its consumer banking business in Honduras, which awaits regulatory approval. The agreement has been penned with Honduras-based Banco Financiera Comercial Hondurena SA, a subsidiary of Grupo Financiero Ficohsa.
Similar moves were undertaken by Citigroup in 2013. Back in July 2013, Citigroup penned a deal with Brazil-based Itau Unibanco Holding SA (ITUB) to sell its retail banking operations in Uruguay. Moreover, in Apr 2013, Citigroup entered into a deal with DenizBank, the Turkish unit of Sberbank, Russia’s largest lender to vend its consumer banking unit in Turkey.
Citi Holdings – The Strategy Continues
Citigroup’s sale of the Greece consumer banking business is part of its strategy to get rid of the non-core assets of Citi Holdings
Citigroup has already been shedding distressed assets from its Citi Holdings unit to drive earnings. Notably, Citi Holdings reported revenues of $1.5 billion in first-quarter 2014, rising 61.0% from the prior-year quarter. Excluding CVA/DVA, Citi Holdings’ revenues increased 58.0% from the prior-year period to $1.4 billion, primarily driven by the absence of repurchase reserve builds for representation and warranty claims in the quarter.
Overall, Citi Holdings’ first-quarter results were close to breakeven and management expects it to reach the breakeven point by 2015.
Bottom Line
Amid troubled tides, while Citigroup is encountering issues from various fronts including the ongoing investigations related to the Mexican fraud and the Federal Reserve’s rejection of its 2014 capital plan, the deal will give the company some financial flexibility.
On the capital front, Citigroup does not intend to resubmit its 2014 Capital Plan. However, the company is working to improvise the loopholes of the plan and is getting ready for the 2015 Capital Plan.
We believe the company is well positioned to resolve its internal inefficiencies and setbacks. Further, we believe these streamlining initiatives will bolster the company’s capital position, reduce expenses and drive operational efficiencies.
Citigroup currently holds a Zacks Rank #3 (Hold). Some better-ranked stocks in the finance sector include Capital City Bank Group Inc. (CCBG) and KCG Holdings, Inc. (KCG). Both the stocks carry a Zacks Rank #1 (Strong Buy).
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