2nd UPDATE: Citigroup Sells $1.6 Billion Of Consumer Loans To GE
06 Ottobre 2010 - 11:22PM
Dow Jones News
Citigroup Inc. (C) said Wednesday it sold $1.6 billion of
consumer loans to General Electric Co. (GE) as the banking giant
continues to shed businesses and loans that don't fit with its new
strategy.
Terms of the deal for credit card and installment loans made
through retailers weren't disclosed, but the impact is likely to be
immaterial to Citi's results. Citi Holdings, the bank's division in
charge of disposing unwanted loans, securities, and businesses,
held about $465 billion in assets as of June 30, including
CitiFinancial North America, the big consumer finance business. The
division held $582 billion in the second quarter of 2009, when Citi
started formally to sell or wind down assets that weren't core to
banking strategy. On June 30, Citi Holdings made up about 24% of
Citigroup's assets; the company expects the division to shrink to
less than 20% by year end.
The purchases were made by GE's GE Capital unit.
Winding down Citi Holdings is a massive effort. Citi Holdings
Chief Executive Michael Corbat has said repeatedly the bank
wouldn't sell assets at fire-sale prices, though the bank has sold
assets at liquidation value.
Of the assets sold to GE, the card loans weren't issued under
Citi's own brand. Delinquencies for such "retail partner"
credit-card loans are slightly higher than for CitiCard loans, but
both portfolios are improving, making sales easier for Citi.
Citi's retail credit-card business manages about $50 billion in
loans for retail partners including Home Depot Inc. (HD) and Exxon
Mobil Corp. (XOM).
Bill Johnson, chief executive of Citi's Retail Partner Cards
unit, said in a press release that selling unwanted loans will
leave Citi "better positioned for future growth as we continue to
partner with premier brand retailers."
Other Citi Holdings disposals include last month's announcement
Citi would sell its 80% stake in Student Loan Corp. (STU) to
Discover Financial Services (DFS) as part of a $600 million
transaction. In August, Citi said it sold $3.5 billion in
commercial real-estate loans to J.P. Morgan Chase & Co. (JPM).
Citi has spun off Primerica Inc. (PRI), sold Japanese securities
business Nikko Cordial and exited from various retail and consumer
finance businesses in Europe. It also sold recently $328 million of
non-performing commercial real-estate loans and private-equity
funds.
By June 30, the division's assets were down 20% since the second
quarter of 2009, when Citi started to formally dismantle what it
considers assets that are a distraction from its core banking
strategy.
On Wednesday, Citigroup shares fell 0.7% to close at $4.10.
-By Matthias Rieker and Kevin Kingsbury, Dow Jones Newswires;
212-416-2471; matthias.rieker@dowjones.com
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