Citigroup Inc. (C - Free Report) , in an attempt to streamline its international operations, has announced the divestiture of one more foreign unit within 10 days of announcing a deal to sell its Greece consumer banking business. The company’s consumer banking business in Spain will be acquired by Madrid-based Banco Popular.
The sale of Citigroup’s Spanish business includes $3.2 billion in assets under management, GAAP assets of nearly $2 billion along with $2 billion in loans and $2.8 billion in deposits. Further, 1.2 million customer accounts, 45 branches and ATMs as well as roughly 950 employees will be transferred to Banco Popular.
The transaction, still subject to regulatory and other customary approvals, is expected to close by the end of Sep 2014. Notably, Citigroup will continue to operate its investment and corporate-banking units in Spain.
Spain was one of the European nations to be battered by the subprime mortgage crisis in 2008. The country is still not out of woods, given the lingering economic slowdown. This is the primary reason behind many financial institutions discontinuing their operations there.
Apart from Citigroup, Lloyds Banking Group plc (LYG - Free Report) sold its Spanish retail banking operations to Banco de Sabadell SA in 2013. Further, according to a Reuters report, Barclays PLC (BCS - Free Report) is, contemplating the divestiture of its Spanish retail bank unit.
For Citigroup, the sale is part of its strategy to relieve itself of the non-core assets of Citi Holdings. The company has been shedding distressed assets from its Citi Holdings unit to drive earnings.
Earlier in Apr 2014, Citigroup announced the sale of its consumer banking business in Honduras to Banco Financiera Comercial Hondurena SA, a subsidiary of Grupo Financiero Ficohsa. Similar moves were undertaken by the company last year as well with the divestiture of retail banking operations in Uruguay to Brazil-based Itau Unibanco Holding SA (ITUB - Free Report) and consumer banking unit in Turkey to DenizBank, the Turkish unit of Russia-based Sberbank Rossii.
As Citigroup continues to face issues on various fronts including the fundamental pressure, investigations related to the Mexican fraud and the Federal Reserve’s rejection of its 2014 capital plan, the deal will provide the company with some financial flexibility.
We believe Citigroup is well positioned to resolve its internal inefficacies and setbacks. Further, such streamlining initiatives will bolster the company’s capital position, reduce expenses and drive operational efficiencies.
Citigroup currently holds a Zacks Rank #3 (Hold).