--Citigroup may sell Brazilian credit card, consumer financing arms

--Strategy seen as focus on core assets as Brazil competition heats up

--Major Brazilian rivals seen interested in bidding for the Citi assets

By Rogerio Jelmayer

SAO PAULO--Citigroup Inc. (C) has put its Brazilian credit card and consumer financing arms up for sale, according to people with knowledge of the company's strategy, in a sign the bank will focus on core assets in the face of stiff competition in Latin America's biggest financial services market.

The U.S-based company is seeking a deal that could amount to at least 1.5 billion Brazilian reais ($765 million), according to three bankers with knowledge of the strategy.

Citigroup, which has struggled to gain a significant foothold in Latin America's largest economy, is looking to sell Credicard, its credit card unit, and consumer financial arm Credicard Financiamentos, according to the three bankers. If completed, the move would effectively mean that Citigroup would exit broad retail operations in Brazil, a highly competitive market, to focus on high-income customers and investment banking, they said.

A spokeswoman for Citigroup said the bank does not comment on market rumors.

Currently, Citi is Brazil's 11th largest bank in terms of assets, with total assets worth BRL63.43 billion, according to the Brazilian Central Bank's most recent figures. Citi declined to offer details on the size of Credicard operations in its Brazilian unit or overall figures for its operations in Brazil.

"The sale represents a sign that Citi wants to sell none of its core businesses, given its lack of scale in Brazil," said Luis Santacreu, a banking industry analyst at Sao Paulo's Austin Rating consulting group. "To operate in the credit card business, and also in the consumer financial area, it needs scale and Citibank has no relevant scale in Brazil."

According to Credicard's Brazilian website, it has 4.7 million credit cards holders in Brazil, accounting for 10% of all billing in the Brazilian market. It has a further 2.3 million customers at its financing arm, according to one of the three bankers consulted by Dow Jones Newswires.

In Brazil, Citi has a total of just 128 branches across the nation, according to central bank figures. By comparison, Brazil's five biggest banks have more than 2,500 branches altogether.

Brazil's largest banks, including state-run Banco do Brasil SA (BBAS3.BR) and private-sector players Itau Unibanco Holding SA (ITUB, ITUB4.BR), Banco Bradesco SA (BBD, BBAS3.BR) and Banco Santander Brasil SA (BSBR, SANB11.BR, SANB3.BR, SANB4.BR) are all interested in possible bids for the Citigroup Brazilian assets, according to the three bankers, who declined to be named. The bankers said that Brazilian investment bank Banco BTG Pactual SA (BBTG11.BR) may also join the bidding.

Press departments for Itau, Bradesco, Santander, a unit of Spain's Banco Santander SA (SAN, SAN.MC), and BTG Pactual also said their banks do not comment on market rumors.

One of the bankers consulted by Dow Jones said the credit card unit is an appealing asset, but the financing unit is of less interest. "The problem is that, when Citi saw there were banks interested in Credicard, it also put the financing arm in the same package," the person said.

Said Mr. Santacreu, "In recent years, banks in Brazil suffered from a rise in default rates, mainly in their consumer financing divisions. Citi was no different and now the bank has, perhaps, realized that it is very expensive to try to hold on to this business." He added, "The bottom line is you need to have scale, a large number of branches for this kind of service to gain traction."

A timetable for the conclusion of a deal hasn't been set, although one of the bankers said he believes it could be wrapped up by the end of March.

"From Citi's perspective, the sale is part of the bank's effort to exit from areas that aren't considered core businesses, as the bank is more interested in serving high-income customers in Brazil and in investment banking instead of [being a] retail bank," said one of the bankers.

The major Brazilian players, on the other hand, are keen to expand into the fast-growing retail sector. Total credit in Brazil at the end of January stood at BRL2.4 trillion, up 16% from January 2012. The size of the loan portfolio is equivalent to 53% of gross domestic product.

"Itau Unibanco appears to be the favorite in this battle given the fact that the bank knows Credicard very well," said another of the bankers.

Credicard was first launched in 1970 and has been through several major evolutions. Most recently, in 2006, Citigroup gained full control of the firm when it bought out its partner in the business, Itau Unibanco. Citi paid BRL280 million for Itau's 50% stake. At the time, the Brazilian bank said it wanted to focus its efforts on developing its own credit card division.

Write to Rogerio Jelmayer at rogerio.jelmayer@dowjones.com

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