) may vend its retail-banking and credit-card business in Spain
to one of the largest banks of the country - Banco Popular
Espanol SA. Banco Popular revealed in a regulatory filing that
talks are underway with Citigroup for the proposed deal.
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Banco Popular will assume Citigroup's 45 retail bank offices and
a minimum of 300 employees. However, Citigroup will continue its
investment and corporate-banking business in Spain.
At a time when US banks are eyeing opportunities outside domestic
boundaries, what prompted Citigroup to consider crawling back?
Let's take a look:
Spain's Recovery: A Concern?
Spain was one of the European nations to be battered by the
subprime mortgage crisis in 2008 and witnessed a record low Gross
Domestic Product (GDP) of negative 1.60 % in first-quarter 2009.
The financial crisis affected the overall banking sector, forcing
the European Union to bail out several banks. Also, a number of
banks were merged.
However, over the years local banks are again rebounding with the
merged entities becoming major players, making it difficult for
foreign banks like Citigroup to sustain their operations in
Spain. Notably, Spain's GDP grew 0.2% in fourth-quarter 2013 from
the previous quarter.
A Boon For Citigroup?
Amid troubled tides when Citigroup is encountering issues from
various sides including the unearthing of the Mexican fraud and
the Federal Reserve's rejection to the approval of company's 2014
capital plan, the proposed deal upon materialization will be a
boon for the company.
Though there has been no official revelation to date, we believe
the deal comes as a part of its strategy announced last year to
exit from 21 unprofitable and less exposed markets globally. The
company has been already shedding distressed assets from its Citi
Holdings unit to boost earnings.
Who Else Doesn't See Gain in Spain
Among other companies that have closed some of their operations
in Spain last year
) is major. The company closed down around 161 offices and
eliminated 890 employees in the country. Further, the company is
contemplating to exit its retail banking business in Spain.
As we look forward to Citigroup resubmitting its capital plan to
the Federal Reserve later this year, we believe the company is
well positioned to work on its internal inefficiencies and
setbacks. Further, we believe these streamlining initiatives will
enhance the company's capital position, reduce expenses and drive
Citigroup currently holds a Zacks Rank #3 (Hold). Some
better-ranked stocks in the major regional banks space include
Wells Fargo & Company
). Both the stocks carry a Zacks Rank #2 (Buy).