Citigroup (C) Plans to Sell China Retail Wealth Unit to HSBC
Citigroup Inc. C is reportedly in talks to sell its China retail wealth management business to HSBC Holdings plc HSBC, per a Reuters article that cited people familiar with the matter.
While the transaction and financial details of the deal is unknown, HSBC is expected to take over "a few hundreds" of Citigroup's China-based staff. Per people familiar with the matter, the deal is likely to be announced as soon as next month.
Nonetheless, Citigroup’s private banking services operations, catering to high net-worth Chinese clients from the bank's locations outside of China, remain in place per sources. C is also likely to set up a securities brokerage unit in China.
The company's China consumer wealth management business manages more than $3 billion in assets. The acquisition underlines HSBC’s focus to expand operations in Asia, particularly in China, as the lender aims to exit less profitable geographies and focus on Asia as an important revenue generator.
As for C, the deal is part of its plan to exit from consumer banking outside of the United States. Markedly, as a major strategic action announced in April 2021, the bank announced intention to exit the consumer banking business in 13 markets across Asia and EMEA, including Australia, Bahrain, China, India, Indonesia and Korea.
Since then, the company has signed deals to divest consumer businesses in nine markets and completed sales in eight markets, including Taiwan, Australia, Bahrain, Malaysia, the Philippines, Thailand, Vietnam and India. Citigroup is also ahead of its plans to gradually wind down consumer banking business in South Korea.
Such exits will free up capital and help the company pursue investments in wealth management operations in Singapore, Hong Kong, the UAE and London to stoke growth. In fact, the company anticipates the release of roughly $12 billion (in aggregate) of allocated tangible common equity over time from such market exits. These efforts will likely help augment its profitability and efficiency over the long term.
Citigroup’s shares have lost 10.5% in the year-to-date period compared with the industry’s decline of 8.7%.
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C presently carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Inorganic Efforts by Other Finance Firms
Eastern Bankshares, Inc. EBC, the stock holding company for Eastern Bank, has entered into an all-stock merger deal with Cambridge Bancorp CATC. Per the deal, Cambridge will merge with and into EasternBankshares. The completion of the deal, subject to the receipt of regulatory approvals and approval by the shareholders of both companies, is expected in the first quarter of 2024.
Per the terms of the deal, which has been approved by the boards of both companies, Cambridge shareholders will receive 4.956 shares of EasternBankshares common stock for each share of CATC common stock they own.
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