In order to comply with regulations,
) might sell its stake worth almost $1 billion in funds managed
by Citi Venture Capital International (CVCI) - a private equity
fund. Earlier, in Dec 2013, Citigroup had divested CVCI to
New-York based investment firm, Rohatyn Group.
Rohatyn Group is a global emerging markets asset management firm.
The firm plans to present the investors in two CVCI funds with
the opportunity to sell their holdings to other buyers, before
Citigroup sells its remaining stake. The deal for the stake sale
is expected to be announced by the first half of 2014.
CVCI is a division of Citigroup's alternative asset management
unit, Citi Capital Advisors. CVCI, which was founded in 2011,
operates entirely in emerging markets such as Singapore, Hong
Kong, Mumbai, New Delhi, London, New York and Santiago.
Presently, CVCI administers five funds as well as other
investments, and has roughly $4.3 billion in equity investments
and committed capital.
Of late, the private equity business has become less lucrative
for banks due to stringent regulations that restrict proprietary
trading and investment activities. As per the Volcker Rule, a
company is prohibited from investing more than 3% of the private
equity funds raised or 3% of the lender's Tier 1 capital. This
provision is expected to adversely affect the future of the
bank-owned private-equity units and will make them less
Over the past few years, several banks have been spinning off
their private equity operations to conform to the requirements of
the Volcker Rule. Recently, Credit Suisse Group AG (CS) agreed to
sell its private equity business to
The Blackstone Group L.P.
Bank of America Corp.
) announced the divesture of BAML Capital Partners, clearly
reflecting the impact of the Volcker Rule.
JPMorgan Chase & Co.
) is also set to divest its private equity arm, One Equity
Partners and establish it as an independent firm.
For Citigroup, this stake sale will also result in lowering its
operating expenses, amid a sluggish macroeconomic environment.
Notably, the banking major has been actively divesting its
non-core operations to boost profitability.
Citigroup currently carries a Zacks Rank #4 (Sell).
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