Markets
C

Citigroup to Vend Greek Consumer Banking Business - Analyst Blog

A generic image of a person with a calculator and a paper with a chart on it.
Credit: Shutterstock photo

In yet another move towards streamlining its international operations, Citigroup Inc. ( C ) inked a deal with Greece based Alpha Bank to sell its Greece consumer banking business and Diners Club of Greece SA credit card operations. The deal is expected to close in third-quarter 2014.

As per the deal, Citigroup will offload GAAP assets of around $600 million, deposits of $1.4 billion, card & loan balance of $540 million and customer base of 480,000. Further, around 730 employees of the consumer banking business along with Citigroup's branch and ATM network in Greece will move into Alpha bank.

While Citigroup sheds its retail business, it proposes to concentrate on boosting its institutional client's portfolio in Greece - including Greek corporations, financial companies, and private bank and public sector clients.

As Citigroup has presence in numerous markets globally, CEO Michael Corbat has planned to restructure, reduce or exit some of the operations in 21 global markets to enhance returns. But the company aims to operate in markets where it has advantage over peers.

In Apr 2014, Citigroup announced the sale of its consumer banking business in Honduras, which awaits regulatory approval. The agreement has been penned with Honduras-based Banco Financiera Comercial Hondurena SA, a subsidiary of Grupo Financiero Ficohsa.

Similar moves were undertaken by Citigroup in 2013. Back in July 2013, Citigroup penned a deal with Brazil-based Itau Unibanco Holding SA ( ITUB ) to sell its retail banking operations in Uruguay. Moreover, 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.

Citi Holdings - The Strategy Continues

Citigroup's sale of the Greece consumer banking business is part of its strategy to get rid of the non-core assets of Citi Holdings

Citigroup has already been shedding distressed assets from its Citi Holdings unit to drive earnings. Notably, Citi Holdings reported revenues of $1.5 billion in first-quarter 2014, rising 61.0% from the prior-year quarter. Excluding CVA/DVA, Citi Holdings' revenues increased 58.0% from the prior-year period to $1.4 billion, primarily driven by the absence of repurchase reserve builds for representation and warranty claims in the quarter.

Overall, Citi Holdings' first-quarter results were close to breakeven and management expects it to reach the breakeven point by 2015.

Bottom Line

Amid troubled tides, while Citigroup is encountering issues from various fronts including the ongoing investigations related to the Mexican fraud and the Federal Reserve's rejection of its 2014 capital plan, the deal will give the company some financial flexibility.

On the capital front, Citigroup does not intend to resubmit its 2014 Capital Plan. However, the company is working to improvise the loopholes of the plan and is getting ready for the 2015 Capital Plan.

We believe the company is well positioned to resolve its internal inefficiencies and setbacks. Further, we believe these streamlining initiatives will bolster the company's capital position, reduce expenses and drive operational efficiencies.

Citigroup currently holds a Zacks Rank #3 (Hold). Some better-ranked stocks in the finance sector include Capital City Bank Group Inc. ( CCBG ) and KCG Holdings, Inc. ( KCG ). Both the stocks carry a Zacks Rank #1 (Strong Buy).

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

CITIGROUP INC (C): Free Stock Analysis Report

KCG HOLDINGS (KCG): Free Stock Analysis Report

BANCO ITAU -ADR (ITUB): Free Stock Analysis Report

CAPITAL CITY BK (CCBG): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

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.

In This Story

C CCBG ITUB

Other Topics

Stocks

Latest Markets Videos

    Zacks

    Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at www.zacks.com.

    Learn More