CitiGroup Inc. (NYSE: C) announced that it is cutting some of its overseas operations, in a move to generate capital and to get closer to getting out of the Federal government’s pocket.
Chief Executive Vice President, Vikram Pandit, is working to shed some significant overseas operations, including its consumer lending business in Scandanavia and its asset-management business in Japan. Pandit has made significant efforts to shed operations that he feels does not fit with CitiGroup’s new core banking mission.
Citi’s international operations has long been one of its core strengths and has been a key differentiator from rivals such as JP Morgan Chase (NYSE: JPM) and Bank of America (NYSE: BAC). Citibank currently has a presence in over 100 countries, but this number will likely continue to shrink as the bank is under pressure to shrink while it works its way out of financial trouble. At the height of the financial crisis, taxpayers became a 1/3rd owner in Citibank.
Citibank won’t become a primarily domestic firm anytime soon though. Pandit believes that some of its international service, such as overseas money transfers for corporations and the federal government one of the bank’s main strengths. In a recent speech, Pandit said, “We move about $3 trillion a day around the world for our clients; sometimes that number is much larger.”
In 2008, Citigroup generated almost $40 billion in revenue, but just $4 billion in net income from its overseas operations. Citibank’s strategy has been to cut foreign operations that are small, have no room for growth, and have no connection to Citi customers elsewhere. Citi has also been cutting assets that do not generate significant deposits.
Citibank recently divested itself from its consumer-finance businesses in Argentina, Italy and Sweden and more sales are likely to follow. In Denmark, Finland and Norway, Citi is no longer making new consumer loans. In many European countries including the U.K and Spain, Citi is hoping to sell its consumer lending businesses to another firm.
Citi’s consumer finance businesses in India and South Korea are both top-three finance companies in those countries, but both are sitting in Citi Holdings, and will be likely to be sold. Citi has also placed its 40% in AFP Habitat in Chile and CitiFondos, Columbia’s third-largest pension fund.
Citi has also agreed to sell Nikko Cordial Securities and Nikko Asset Management in Japan and will likely sell its Bellsystems24 call-center operations next month.
