Citigroup to Sell Brazil, Argentina, Colombia Retail Units

  • CEO Corbat says bank is `committed to Latin America'
  • `Strong presence' will remain for institutional clients

Citigroup Inc., the bank that gets more revenue from outside its home market than any of its U.S. competitors, plans to sell retail-banking and credit-card operations in Brazil, Argentina and Colombia.

The businesses will be moved into the Citi Holdings unit, which houses the company’s unwanted assets, effective this quarter, the New York-based company said Friday in a statement.

“Citi will maintain a strong presence in Brazil, Argentina and Colombia in order to continue serving its many corporate and institutional clients in these markets,” Citigroup said in the statement.

Chief Executive Officer Mike Corbat has been scaling back Citigroup’s retail footprint to simplify the company, cut costs and boost returns. In October 2014, Corbat said the firm was dropping consumer banking in 11 markets, including Peru, Costa Rica and four others in Central and South America. With Friday’s announcement, Corbat takes another step away from his predecessor, Vikram Pandit, who made expanding into emerging markets one of his central strategies.

“They’d been in these countries for over 100 years and it says to me that there are no sacred cows at Citigroup and they are serious about trying to change the corporate culture,” Charles Peabody, an analyst at Portales Partners LLC, said in an interview. Peabody changed his rating on Citigroup to a buy from hold in January.

Citigroup operated branch networks in 24 countries at year-end, down from 40 as recently as March 2012. The decision to leave Argentina, Brazil and Colombia retail banking is one of the most sweeping since consumer-banking chief Stephen Bird took over in June from Manuel Medina-Mora, who retired. Jane Fraser, who had also been in the running for Medina-Mora’s job, runs the Latin America region from Miami.

The bank’s plans to exit retail banking in Argentina and Brazil were reported Thursday by Bloomberg News, citing a person familiar with the matter.

Since 1914

The Argentina unit opened in 1914 and was the bank’s first non-U.S. branch, according to Citigroup’s website. It has more than 2,700 employees in the country, 71 branches and 44.6 billion pesos ($3 billion) in assets, for the No. 12 ranking in the country, data from the nation’s banking association show. Argentina’s economy has been struggling after years of currency controls and policies that discouraged investment. The country has been unable to tap international bond markets because of a feud with creditors left over from the nation’s 2001 default.

Argentina sued Citigroup’s local unit last year after it reached an accord with a hedge fund allowing the bank to make two bond payments that the government said were illegal. In March, the firm said it would quit the custody business in the country after the government threatened to revoke its operating license.

Creditor Deals

Since President Mauricio Macri took over the presidency in December, he’s lifted currency controls and scrapped export taxes in a bid to attract more investment. While the country remains isolated from international capital markets, the government has reached deals with some holdout creditors left over from the 2001 default and is negotiating with others in a bid to resolve the decade-long dispute.

Citigroup had about 6,000 employees in Brazil as of 2014, a company executive said at the time. It operates 71 branches in Brazil, where it began banking in 1915, according to the website. Citigroup is the 10th largest commercial bank in the country, with 80.6 billion reais ($20 billion) in assets, according to central bank data. Foreign lenders including London-based Barclays Plc and Frankfurt’s Deutsche Bank AG have been pulling back from the South American nation as it faces what’s predicted to be the worst recession in more than a century.

Antitrust Concern

It may be difficult for Citigroup to find a buyer in Brazil. While HSBC Holdings Plc agreed to sell its Brazil unit in August to Banco Bradesco SA, the deal attracted a deeper review by Brazil’s antitrust regulator, which ordered the disclosure of all the offers the bank received in the past two years and an explanation of why it picked Bradesco.

Brazil’s four biggest banks, Banco do Brasil SA, Itau Unibanco Holding SA, Caixa Economica Federal and Bradesco, had a 76 percent share of Brazil’s credit market and 70 percent of the nation’s banking assets, according to the central bank’s financial stability report on the first half of 2015, released in October.

Citigroup was the second-worst performing company in the KBW Bank Index Friday, falling 1.1 percent to $38.49 in New York trading at 11:09 a.m. The shares had fallen 25 percent this year through Thursday.

While the asset sales will help Citigroup get smaller, they may crimp future earnings potential, Peabody said. The businesses didn’t have a material impact on 2015 earnings, the bank said Friday.

“The reason to be in the emerging markets is because the middle class will develop in a bigger way, and that wealth will be spent and you should be able to participate in that growth,” he said. “They are giving up future growth to execute this plan.”

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