) has put up its Brazilian consumer finance division, known as
Credicard and Credicard Financiamentos, for sale. Citigroup plans
to complete the divestiture by the end of this month and
anticipates 1.5 billion reais ($761 million) from it.
Banco Santander (Brasil) S.A.
Banco Bradesco S.A.
) and Banco do Brasil S.A have emerged as prospective buyers.
Earlier, in 2006, Citi paid 280 million reais ($139 million) for
the 50% stake in Credicard, and took over its long-time partner,
Itau Unibanco Holding S.A.
) in the process. However, the U.S. banking giant has since
struggled to gain a considerable grip in the largest market of
Latin America due to intense competition. The deal indicated that
Citi would exit retail operations in Brazil to focus on its core
operations like high-income customers and investment banking.
Recently, regulatory upheavals led to Citi incurring higher
expenses in Brazil. Thus, the aforementioned deal will also
benefit Citi's policy of boosting profitability by shedding
Citi´s Credit Card division has 4.7 million credit-card holders
in Brazil, and accounts for 10% of the total billing in the
Brazilian market. It also has 2.3 million customers at its
financing unit. Thus, it is a tempting proposition for the local
The local banks are seeking to garner more and more market share
in the fast-growing retail banking market in Brazil. The
acquisition of the consumer finance units of Citi would be a
positive step in that direction.
We believe the sale of this non-core asset is a strategic fit for
Citi. In fact, the company's long-term strategy to shrink
non-core assets will ultimately reduce its risk profile and free
up capital to be invested in its core businesses.
Citi currently carries a Zacks Rank #3 (Hold).
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