In furtherance of its strategy of reducing international
operations, Citigroup Inc. ( C ) entered into a deal
with DenizBank, the Turkish unit of Sberbank, Russia's largest
lender to vend its consumer banking unit in Turkey. Price for the
transaction was undisclosed. Moreover, the deal awaits regulatory
approval and is expected to be completed in third quarter
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As per the terms of the agreement, DenizBank will take over 1.2
billion liras ($650 million) worth of assets and 1.5 billion liras
(about $800 million) of deposits of Citigroup's Turkish unit.
Moreover, Citigroup's consumer business in Turkey had 600,000
clients and 1,500 employees as of Dec 2012.
Citigroup's decision to sell off its consumer operations in Turkey
comes as part of its restructuring initiatives to counter the fall
in revenues. Aimed at increasing the efficiency of the company's
overall business, the initiatives include streamlining operations
as well as optimizing footprints across geographies. Moreover,
annual cost savings are projected to surpass $1.1 billion beginning
With the addition of retail banking activities of Citigroup, the
position of DenizBank will be consolidated. However, Citigroup will
continue its commercial and corporate banking activities in
Earlier in Mar 2013, at an investor conference in Boston, Mike
Corbat, the new chief executive officer (CEO) of Citigroup came up
with financial targets for the company, set to be achieved by 2015.
Moreover, the CEO announced restructuring initiatives for the
markets where Citi is operating its business.
Corbat aspires to earn return of 10% on tangible common equity in
2015, up from 7.9% earned in 2012. Moreover, return on assets is
expected in the range of 0.9% - 1.1%, up from 0.62% in 2012,
adjusted for certain items. Specifically, at Citicorp, efficiency
ratio is aimed to improve in the mid-50%.
Citigroup operates in numerous markets worldwide. Therefore,
Corbat has planned to restructure, reduce or exit some of the
operations in 21 markets globally to enhance returns. Though names
of such markets were undisclosed, but it was intimated that most of
them involve consumer businesses. Notably, in Dec 2012, Citi
announced its plans to exit consumer businesses in Uruguay,
Paraguay, Turkey, Romania and Pakistan.
With the ambition of achieving financial targets in 2015 by
restructuring the business, Corbat aims to provide clients with
products globally. Streamlining of operations and efficiency
improvements would aid Citi to accomplish its goals within the
Further, in a challenging operating environment, lower returns and
stringent capital norms, bolstering revenue has become a challenge.
Hence, many Wall Street banks are downsizing their businesses and
Bank of America Corp. ( BAC ), Goldman
Sachs Group Inc. ( GS ) and
Deutsche Bank AG ( DB ) are rightsizing
their businesses and slashing jobs to address revenue slump. We
believe that until a recovery in revenue occurs, sustaining and
elevating profitability through cost reduction measures including
layoffs will continue.
Citigroup is scheduled to announce its first-quarter 2013 results
on Apr 15. The Zacks Consensus Estimate for the quarter is pegged
at $1.18 per share. The Zacks Earnings ESP (Read: Zacks Earnings ESP: A Better Method ) for
Citigroup is -0.85% for the first quarter. This, along with its
Zacks Rank #3 (Hold), makes us less confident regarding the company
reporting an earnings beat.