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Citigroup (C) to Sell Subprime Lending Unit in Canada

CMA C BAC CARO

Trades from $3

Citigroup Inc. (C - Free Report) entered into an agreement to sell CitiFinancial, its subprime lending unit in Canada, to an investor group led by private investment firm, JC Flowers and Värde Partners.

This is part of Citigroup’s strategy to emphasize on growth in core businesses through restructuring, expense management and streamlining operations internationally.

The divestiture is subject to regulatory approvals and is anticipated to close in the first half of 2017. While the amount for the sale remained undisclosed, this transaction is not likely to affect Citi’s financials.

CitiFinancial is a community-based lender and retail service provider in Canada. It offers small loans to customers in Canada at interest rates that are higher than what most other lenders offer. Also, it provides retail financing to a lot of top retailers in Canada. These make the deal lucrative for JC Flowers and Värde Partners.

Vice president of JC Flowers, Thomas Harding stated, "CitiFinancial Canada is a market leader with solid growth potential, and we look forward to collaborating with their outstanding management team to extend the business's reach in underserved consumer markets in Canada.” He further added, "We believe J.C. Flowers' vast experience with financial services around the globe will help enhance CitiFinancial Canada's products and services."

Aneek Mamik, senior managing director and head of North American specialty finance for Värde said, "We are excited to add a great business to our specialty finance portfolio and look forward to partnering with the strong and experienced team at CitiFinancial."

Management at Citi said that it would continue to serve its core institutional and consumer businesses in Canada post divestiture. The company was advised by its Institutional Clients Group regarding the transaction.

Currently, Citigroup carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the finance space include Carolina Financial Corporation (CARO - Free Report) , Bank of America Corporation (BAC - Free Report) and Comerica Incorporated (CMA - Free Report) .

Carolina Financial has witnessed an upward earnings estimate revision of 12.9% for the current year in the past 30 days. Also, its share price is up 41.4% 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.

Bank of America carries a Zacks Rank #2 (Buy) and witnessed an upward earnings estimate revision of nearly 5% for the current year over the past 30 days. Moreover, its share price is up 19.3% year to date.

Comerica also carries a Zacks Rank #2. It has witnessed an upward earnings estimate revision of 8.8% for the current year in the past 30 days and its share price has surged 44.8% year to date.

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