As part of its plan to boost profits by reducing costs, Citigroup Inc. (C - Free Report) recently agreed to sell its consumer banking business in both Brazil and Argentina.
Latin America’s largest bank, Itau Unibanco Holdings S.A. (ITUB - Free Report) has agreed to purchase the Brazilian unit for 710 million reais ($220 million). However, the price agreed by Banco Santander Rio which will purchase the Argentina unit remains undisclosed.
The sale constitutes assets worth $2.8 billion in Brazil and $1.4 billion in Argentina and includes credit cards, personal loans, deposit accounts and Citi’s brokerage businesses. Even after the transition, Citi’s consumer banking operations will continue to function in both Brazil and Argentina. It will continue to serve its commercial banking and corporate and investment banking clients in both the countries.
Jane Fraser, Citi’s Latin America CEO said, “Brazil is a strategic market for Citi and is an essential part of our footprint and global network.” She further added that the future of Citi’s Argentina unit is also “extraordinarily promising."
According to the company’s website, Citigroup’s Argentina operations began in 1914, while it began banking in Brazil a year later.
Marcelo Kopel, Itau Unibanco’s investor relations officer, said that its acquisition of the Brazilian unit has helped it reinforce its presence in the wealth segment, which constitutes majority of Citigroup’s Brazilian customers. Citi has been delivering its services to local, regional and multinational clients in Brazil for more than a century. The bank continues its commitment towards maintaining and growing its presence in Brazil which has provided attractive business opportunities to Citi.
Notably, Santander Rio already has 2.7 million clients and 401 branch offices and the acquisition of Citi’s Argentina unit will allow it to further increase its client base.
The completion of both the transactions is, however, subject to regulatory approvals and Citibank does not expect it to have any material impact on its earnings. Notably, Citigroup’s share price has declined approximately 0.6% to $48.99 per share from the closing price a day before the sale was announced.
The company said in Oct 2014 that it would drop consumer banking in 11 markets, including Peru, Costa Rica and four others in Central and South America. However, it has not yet disclosed potential buyers of its Colombia unit which was up for sale earlier this year.
Currently, Citigroup carries a Zacks Rank #3 (Hold).
A couple of better-ranked financial stocks include Farmers Capital Bank Corporation (FFKT - Free Report) and JPMorgan Chase & Co. (JPM - Free Report) .
Farmers Capital witnessed an upward earnings estimate revision of 0.9% over the past 60 days and its share price is up 16.3% year to date. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
JPMorgan currently carries a Zacks Rank #2 (Buy). It witnessed an upward earnings estimate revision of approximately 0.2% over the past 60 days. Its share price has gained about 3.45% year to date.
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