--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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