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Citi's (C) Sale of Russian Consumer Bank Arm Delayed Amid War
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Per a Bloomberg article, Citigroup, Inc.’s (C - Free Report) endeavors to sell its Global Consumer Banking (GCB) business in Russia have been stalled as the country's military actions in Ukraine impede the sale procedures. As a result, C is helping some employees get a transfer abroad.
Citi operates both its Institutional Clients Group (ICG) and GCB businesses in Russia. C’s domestic affairs in Russia are operated via its subsidiary (Citi Russia), which has its functional currency in the Russian ruble.
The bank had announced a major strategic action in April 2021, whereby the GCB segment will exit 13 markets, including Russia to help free up capital and pursue investments in wealth management operations in Singapore, Hong Kong, the UAE and London to stoke growth.
Amid the ongoing Russia-Ukraine tussle, C disclosed its $9.8-billion exposure to Russia in its annual report filed with the Securities and Exchange Commission. The divestiture of the GCB unit seems complicated now, thanks to the current sanctions on the Russian banks and oligarchs. A prospective buyer is unlikely to widen his Russian exposure and now that the Russian banks are under pressure, there is a high possibility of Citi winding up its business in the region instead of passing it down to a competitor.
Per the aforementioned article, Citi is conveying to international firms about its committal in providing them with financial services as they adjust their presence in Russia. In some cases, the firms pare units and look to move money overseas. C’s commodities-trading desk has been one of the few so far to continue providing funds for the existing deals involving natural gas coming from Russia.
Going by the article, Citi’s chief financial executive Mark Mason warned that under a severe stress scenario, C could lose $4.9 billion or about half of its total exposure. “But it could also be a lot less than that, just depending on how the situation evolves, and we’ll continue to monitor it,” he said.
The moves highlight how Russia’s ongoing pursuit to invade Ukraine made the future less certain for Citi’s roughly 3,000 workers in Russia. Ed Skyler, Citi’s head of public affairs, said in an emailed statement, “As we work toward that exit, we are operating that business on a more limited basis given current circumstances and obligations.”
Our Take
Citi apprehends indirect impacts if the Russia-Ukraine conflict persists. The imposed sanctions on the Russian banks complicate the marketing and the sale process for Citi Russia.
Nonetheless, C’s long-term strategy to increase fee-based business mix and shrink its non-core assets bodes well for the long term. The bank is steadily investing in growth opportunities across wealth and commercial banking, treasury and trade solutions, and securities service businesses to grow its fee revenues across the ICG segment. Such efforts will bolster its position in the booming digital industry and diversify its revenue stream.
Shares of this currently Zacks Rank #3 (Hold) stock have lost 20.7% in the past six months, underperforming the industry’s fall of 9.3%.
Over the past year, shares of CIB have rallied 12.9%, while the stocks of FBIZ and PCB have jumped 17.3% and 32%, respectively.
Over the past 30 days, the Zacks Consensus Estimate for CIB’s current-year earnings has been revised 21.7% upward, while the same for FBIZ has moved 3.4% north. Moreover, current-year earnings estimates for PCB have moved 14.4% up from the past two months’ level.
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Citi's (C) Sale of Russian Consumer Bank Arm Delayed Amid War
Per a Bloomberg article, Citigroup, Inc.’s (C - Free Report) endeavors to sell its Global Consumer Banking (GCB) business in Russia have been stalled as the country's military actions in Ukraine impede the sale procedures. As a result, C is helping some employees get a transfer abroad.
Citi operates both its Institutional Clients Group (ICG) and GCB businesses in Russia. C’s domestic affairs in Russia are operated via its subsidiary (Citi Russia), which has its functional currency in the Russian ruble.
The bank had announced a major strategic action in April 2021, whereby the GCB segment will exit 13 markets, including Russia to help free up capital and pursue investments in wealth management operations in Singapore, Hong Kong, the UAE and London to stoke growth.
Amid the ongoing Russia-Ukraine tussle, C disclosed its $9.8-billion exposure to Russia in its annual report filed with the Securities and Exchange Commission. The divestiture of the GCB unit seems complicated now, thanks to the current sanctions on the Russian banks and oligarchs. A prospective buyer is unlikely to widen his Russian exposure and now that the Russian banks are under pressure, there is a high possibility of Citi winding up its business in the region instead of passing it down to a competitor.
Per the aforementioned article, Citi is conveying to international firms about its committal in providing them with financial services as they adjust their presence in Russia. In some cases, the firms pare units and look to move money overseas. C’s commodities-trading desk has been one of the few so far to continue providing funds for the existing deals involving natural gas coming from Russia.
Going by the article, Citi’s chief financial executive Mark Mason warned that under a severe stress scenario, C could lose $4.9 billion or about half of its total exposure. “But it could also be a lot less than that, just depending on how the situation evolves, and we’ll continue to monitor it,” he said.
The moves highlight how Russia’s ongoing pursuit to invade Ukraine made the future less certain for Citi’s roughly 3,000 workers in Russia. Ed Skyler, Citi’s head of public affairs, said in an emailed statement, “As we work toward that exit, we are operating that business on a more limited basis given current circumstances and obligations.”
Our Take
Citi apprehends indirect impacts if the Russia-Ukraine conflict persists. The imposed sanctions on the Russian banks complicate the marketing and the sale process for Citi Russia.
Nonetheless, C’s long-term strategy to increase fee-based business mix and shrink its non-core assets bodes well for the long term. The bank is steadily investing in growth opportunities across wealth and commercial banking, treasury and trade solutions, and securities service businesses to grow its fee revenues across the ICG segment. Such efforts will bolster its position in the booming digital industry and diversify its revenue stream.
Shares of this currently Zacks Rank #3 (Hold) stock have lost 20.7% in the past six months, underperforming the industry’s fall of 9.3%.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks in the banking space are Bancolombia S.A. (CIB - Free Report) , First Business Financial Services (FBIZ - Free Report) and PCB Bancorp (PCB - Free Report) . At present, CIB flaunts a Zacks Rank #1 (Strong Buy), while FBIZ and PCB carry a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.
Over the past year, shares of CIB have rallied 12.9%, while the stocks of FBIZ and PCB have jumped 17.3% and 32%, respectively.
Over the past 30 days, the Zacks Consensus Estimate for CIB’s current-year earnings has been revised 21.7% upward, while the same for FBIZ has moved 3.4% north. Moreover, current-year earnings estimates for PCB have moved 14.4% up from the past two months’ level.