Citigroup Inc updates

Citigroup has sold its Australian consumer business to National Australia Bank for about A$1.2bn (US$882m) in the first phase of an exit from its underperforming Asian and eastern European retail units.

Under the deal announced on Monday, Citi will transfer A$12.2bn in loans and A$9bn deposits to NAB, Australia’s fourth-largest bank by market capitalisation. About 800 Citi employees will move to NAB, which said the transaction would support the growth of its personal banking business.

The disposal follows a decision in April by Jane Fraser, Citi’s recently appointed chief executive, to put its 13 consumer operations across Asia and eastern Europe up for sale in a drive to boost profitability. Citi will instead focus its business on wealth management in Asia through hubs in Hong Kong and Singapore, where it will also maintain its consumer banking units.

“This is a positive outcome for our clients, our colleagues and for Citi. As this transaction shows, we are moving forward with urgency as we refresh our strategy and execute the decisions we have already made as part of that effort,” said Fraser.

“We are focusing our resources on businesses where we have scale and competitive advantages in order to deliver growth and improved returns over time,” she added.

Citi’s Australian institutional business is not included in the transaction. The US bank said it would continue to serve its institutional clients in the country and across the Asia-Pacific region.

Fraser said the first round of bidding for the Australian retail business was “competitive” last month as the bank announced its second-quarter results, but did not give details on whether Citi expected to make a profit or loss on the sale.

UK-based Standard Chartered, Singapore’s DBS Group and Japan’s MUFG are among banks in talks with Citi about acquiring its retail banking operations elsewhere in Asia.

The Australian transaction is expected to close by March 2022 and requires regulatory approval from authorities in the country.

Ross McEwan, NAB’s chief executive, said the acquisition would support the bank’s growth in personal banking and unsecured lending.

“The proposed acquisition . . . brings scale and deep expertise in unsecured lending, particularly credit cards,” said McEwan.

NAB said the deal was structured as an asset and liability transfer for the net assets of Citi’s consumer business, plus a cash premium of A$250m. The A$1.2bn equity value implied a multiple of eight times the A$145m net profit after tax for Citi’s Australian consumer business for the 12 months to June.

Nathan Zaia, an analyst at research group Morningstar, said the deal made sense for NAB, even though Australia’s credit card market is being disrupted by “buy now, pay later” (BNPL) rivals. Citi has already announced a BNPL offering in Australia in partnership with Mastercard.

“Credit cards remain an important product and we think BNPL functionality being tacked on will help slow consumer take-up of other vanilla BNPL offerings,” said Zaia.

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