In furtherance of its strategy of reducing international
operations, on Tuesday, the Brazilian unit of
) came up with the announcement of the sale of its credit card
and consumer finance units in Brazil for $1.37 billion (R$2.77
billion). The agreement has been penned with Brazil-based Itau
Unibanco Holding S.A. (ITUB), which will take over Credicard, the
non-banking credit card and consumer finance business of
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Citigroup's decision to sell off its consumer operations in
Brazil 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 and optimizing footprints across geographies.
With the completion of this agreement, the position of Itau
Unibanco will be consolidated in the card market in Brazil.
Moreover, Itau Unibanco's existing leadership in the consumer
finance and credit card markets with a diverse portfolio of
products and services and specialized platforms will be
Notably, with the buyout of Credicard, Itau Unibanco's credit
card base will surge to 37.7 million from 32.8 million as of Apr
2013. However, Citigroup will continue its institutional and
retail consumer banking businesses in Brazil.
Terms of the Deal
As per the terms of the deal, Itau Unibanco will acquire Banco
Citicard SA and Citifinancial Promotora Ltda along with the
Credicard card brand. Notably, the deal includes the acquisition
of 96 Credicard stores and about $3.26 billion in consumer loan
balances as of Dec 31, 2012.
However, the takeover deal excludes Corporate cards, the Citi and
Diners branded portfolios, and the Credicard Platinum portfolio
(except for Exclusive), or Credicard American Airlines cards.
These cards will be transferred to Citi brand and Citigroup will
continue to manage these.
After receiving approval from the regulatory authorities,
Citigroup expects to make an after-tax gain of about $300 million
or 10 cents per share following the closure of the deal.
Moreover, Citigroup will reflect these business activities as
discontinued operations beginning in the second quarter of 2013.
Earlier in Apr 2013, Citigroup 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 is expected to be
completed in third-quarter 2013.
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
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. Additionally, the CEO announced restructuring initiatives
for the markets where Citi operates its business.
Corbat aspires to earn a 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 revenues has become a
challenge. Hence, many Wall Street banks are downsizing their
businesses and announcing layoffs.
Citigroup currently carries a Zacks Rank #3 (Hold). Some well
performing banks include
JPMorgan Chase & Co.
Fifth Third Bancorp
State Street Corporation
), all of which carry a Zacks Rank #2 (Buy).