Citigroup to exit consumer business in 11 markets, including Hungary

Citi should find a buyer for the Hungarian consumer business that is interested in extending consumer loans (and especially in credit/debit cards in which the bank excels) and also in providing services for Citibank’s premium and private banking clients. Most of large universal banks operating in Hungary meet this condition, so a large part of them are actually potential buyers. Citibank’s objective for the following months could be to continue its consumer business activity undisturbed, in a way that maintains or even adds value to the business, even if it means acquiring new customers.

In Hungary, Citibank is also engaged in lending to large corporates and SMEs. It has also assumed a role several times in managing bond issuances for the state over the past few years. These functions are not to be affected by today’s announcement and Citibank has no intention to exit Hungary altogether. Partial exit has to do with Citigroup’s global strategy and has nothing to do with Hungary.Statement from the Hungarian unit

Citibank’s announcement is of key importance for Hungary because it is one of the largest player in private banking. At a HUF 15/75 million entry limit Citi managed assets of HFU 205 billion on 9,100 accounts at the end of June, according to Portfolio’s Private Banking Survey. Disregarding the different entry restrictions at the different service providers, Citi managed the 6th largest asset portfolio and it had the second-largest number of accounts, based on our survey.

During our survey we have heard from several service providers that due to the harsh adverse environment consolidation will continue in the financial sector. We witnessed a similarly significant announcement in 2012 when BNP Paribas sold its private banking business to Erste. According to market sources, there are already several potential buyers queuing up for Citi’s consumer business.

“These steps are in harmony with Citi’s global strategy which is aimed at focusing the group’s resources on opportunities ensuring higher returns. Hungary is an important country for Citi and it will continue providing services to its corporate, institutional and SME customers there, just like it has been since 1985. In the coming period services to retail customers will be unchanged, and the operation of the consumer business, including branches and offices will continue as business as usual. Citi’s corporate and institutional business remains in operation in 160 countries and administrative regions.

Hungary is of key importance for Citi’s European strategy and we will continue to provide world class services to our SME, corporate and institutional customers," Citi’s Hungarian arm said in a separate statement.

Executive statements

“I am committed to simplifying our company and allocating our finite resources to where we can generate the best returns for our shareholders," commented Michael Corbat, Chief Executive Officer of Citi.

“While we have made progress optimizing these 11 consumer markets, we believe our Global Consumer Bank will achieve stronger performance by focusing on the countries where our scale and network provide a competitive advantage," he added.

“Today’s actions are the next step in the execution of our strategy to build an urban-based, globally integrated consumer bank," added Manuel Medina-Mora, Citi Co-President and CEO of GCB.

How was the quarter?

Citigroup fared well in the third quarter and its earnings per share (EPS) beat analysts’ consensus forecast by 2.7% and revenues exceeded the market’s call by nearly 5%.

Key items in Citigroup’s Q3 earnings report:

• A USD 15 million fraud was uncovered at Citi’s Mexican unit Banamex. Citi opened its second internal investigation into the fraud there which involves a personal security service business and comes in addition to the internal inquiry Citigroup is pursuing related to a fraud related to a Mexican oil services company.
• trading revenues rose 6.7% yr/yr, which is more favourable than what could have been expected in view of sharply rising revenues in September;
• fixed income market revenues rose 5% (to USD 2.98 bn) and equity market revenues went up 14% (to USD 763 m)’
• operating expenses rose 5.8% to USD 12.36 bn partly due to preparations for the EU stress tests
• legal and related costs jumped 40% to USD 951 m, while repositioning costs rose to USD 382 m from USD 133 m.

• Tags:
• citigroup,
• economy,
• companies,
• exit,
• equity,
• consumer