Citigroup Inc. exited an almost seven-year-old investment in India’s largest mortgage lender, selling its stake in Housing Development Finance Corp. for 95.5 billion rupees ($1.9 billion).
The U.S. bank sold 145.3 million shares at 657.56 rupees apiece, it said in a statement today. That’s a 6.2 percent discount to HDFC’s closing price yesterday. The sale resulted in a pretax gain of $1.1 billion for Citigroup, the release showed. Citigroup had offered the stock at 630 rupees to 703.55 rupees, according to a term sheet obtained by Bloomberg News. HDFC shares slipped as much as 6.3 percent today.
Citigroup joins European and U.S. banks including HSBC Holdings Plc and Goldman Sachs Group Inc. in selling Asian assets as global rules for higher risk buffers force lenders to boost capital. Citigroup, the third-largest U.S. lender by assets, also plans to raise as much as $20 billion in debt this year to make payments on a 2008 emergency credit program.
“Banks globally are currently under pressure to boost capital, and asset disposals make sense as the current environment makes fundraising from capital markets difficult,” said Lewis Wan, Hong Kong-based chief investment officer of Pride Investments Group Ltd., which manages $250 million of assets. “The fundamentals of U.S. banks and European banks are relatively weaker than that of Asian banks.”
Asian Asset Selldown
HDFC fell as low as 657.50 rupees today in Mumbai trading and was down 4.6 percent at 11:21 a.m. local time. Before today, the stock had gained 7.6 percent this year, compared with a 17 percent advance in the BSE India Sensitive Index.
Citigroup said in June it was reducing its stake in Mumbai-based HDFC to 9.9 percent from 11.4 percent, in preparation for meeting the Basel III capital rules.
The latest sale is part of Citigroup’s “ongoing capital planning efforts,” the New York-based bank said.
HSBC, Europe’s largest bank, this week told customers it was withdrawing from consumer banking in Japan and closing down six branches. The London-based bank was seeking buyers for its Premier unit, which targets wealthy individuals in the country, three people familiar with the matter said on Jan. 25. The bank has also sold assets in Thailand and Korea.
In November, Goldman Sachs raised $1.1 billion selling shares of Beijing-based Industrial & Commercial Bank of China Ltd., the world’s most profitable bank. Bank of America Corp. said it would sell 10.4 billion shares of China Construction Bank Corp. the same month, for a profit of about $1.8 billion.
Carlyle Group LP divested 20 million shares in HDFC for 677 rupees apiece, or about 13.5 billion rupees, a person with knowledge of the sale said on Feb. 1. The price was at a discount of 3 percent to HDFC’s Jan. 31 closing price.