Citigroup Sheds Belgian Retail Biz - Analyst Blog

Citigroup Inc. ( C ) is selling its retail business in Belgium to Credit Mutuel Nord Europe (CMNE) as part of its effort to shed non core assets. The transaction is expected to close in the second quarter of 2012. Terms of the deal were, however, kept confidential. The sale includes Citigroup's credit-card and consumer-loan business.

The deal is also a strategic fit for CMNE. It would facilitate the company to increase its product offerings as well as broaden its footprint particularly in northern France and in Belgium, thereby expanding its client base.

Besides Citigroup, the other Wall Street biggie Bank of America Corp. ( BAC ) is also trying to remove a large number of non-core assets to strengthen its capital position and balance sheet.

Our Take

Hurt by billions in losses and write-downs of problem loans and toxic assets, Citigroup had to ultimately resort to a bailout. It received $45 billion bailout during the last recession and went for a restructuring plan across its business. The bailout money was repaid by December 2009.

Citigroup categorized CitiCorp as its core operating unit and Citi Holdings as its non-core unit, intending to dispose (through sale and divestitures) its non-core operations. As a matter of fact, the company has already announced the sale of a number of its businesses within this segment. These run off ultimately reduces the company's risk profile and frees up capital that it continues to invest in core businesses.

Citicorp remains attractive, and its unique franchise allows clients to access high growth foreign markets. The segment has reported consistent revenues despite the financial turmoil in the past few years. Going forward, the company intends to capitalize on the enormous strength of this franchise, once the ongoing de-leveraging is accomplished.

However, we believe that though this strategy to shrink non-core assets would improve the valuation over time, the shrinking of the Citi Holdings portfolio would result in revenue challenges, partially restricting the upside potential of the stock.

Citi currently retains a Zacks #3 Rank, which translates into a short-term 'Hold' rating.

BANK OF AMER CP ( BAC ): Free Stock Analysis Report

CITIGROUP INC ( C ): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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