--Citigroup looking to sell Credicard and Credicard
Financiamentos for at least BRL1.5 billion -sources
--Potential move seen as a sign bank plans to focus on private
and investment banking
--Brazil's largest banks could be interested in Citigroup's
assets -sources
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 plans to
focus on private and investment banking at a time of fierce
competition in Latin America's biggest financial-services
market.
Citigroup, which has struggled to gain a significant foothold in
Latin America's largest economy, is looking to sell its credit-card
unit Credicard and consumer-finance arm Credicard Financiamentos
for at least 1.5 billion Brazilian reais ($765 million), according
to the three bankers familiar with the plans.
If completed, a sale would represent Citigroup's exit from a key
segment of the highly competitive retail-banking market in Brazil
to concentrate on high-income customers and investment banking,
according to the three bankers. A spokeswoman for Citigroup said
the bank doesn't comment on market rumors.
Citigroup is Brazil's 11th-largest bank by assets, with total
assets of 63.43 billion reais, according to the Brazilian Central
Bank's most recent figures. Citigroup declined to offer details on
the size of Credicard operations or overall figures for its
operations in Brazil.
"To operate in the credit-card business and also in the
consumer-finance area it needs scale, and Citibank has no relevant
scale in Brazil," said Luis Santacreu, a banking analyst at Sao
Paulo's Austin Rating consulting group.
Citigroup has 128 bank branches across the country, according to
central- bank figures. By comparison, Brazil's five biggest banks
have more than 2,500 branches altogether.
Citigroup's Credicard has 4.7 million credit-card holders in
Brazil, accounting for 10% of all billing in the Brazilian market.
It also has 2.3 million customers at its financing arm, according
to one of the three bankers familiar with the sale plans.
Major Brazilian financial institutions are keen to expand into
the fast-growing retail sector. Total credit in Brazil at the end
of January stood at 2.4 trillion reais, up 16% from January 2012.
The size of Brazil's total loan portfolio is equivalent to 53% of
gross domestic product, well below those of developed
economies.
Brazil's largest banks, including state-run Banco do Brasil SA
(BBAS3.BR, BDORY) and private-sector lenders Itau Unibanco Holding
SA (ITUB, ITUB4.BR, ITUB3.BR), Banco Bradesco SA (BBD, BBDC4.BR,
BBDO) and Banco Santander Brasil SA (BSBR, SANB11.BR, SANB3.BR,
SANB4.BR) could be interested in Citigroup's assets, according to
the three bankers. They said Brazilian investment bank Banco BTG
Pactual SA (BBTG11.BR) may also join the bidding.
Officials from Banco do Brasil, Itau, Bradesco, the unit of
Spain's Banco Santander SA and BTG Pactual declined to comment.
One of the bankers familiar with the situation said the
credit-card unit is seen as an appealing asset, but the financing
unit is of less interest. "The problem is that, when Citigroup saw
there were banks interested in Credicard, it also put the financing
arm in the same package," this person said.
In recent years, banks in Brazil suffered from a rise in default
rates, mainly in their consumer-financing divisions. Citigroup "was
no different and now the bank has, perhaps, realized that it is
very expensive to try to hold on to this business," said Mr.
Santacreu. Banks need "a large number of branches for this kind of
service to gain traction," he added.
Credicard was launched in 1970. Citigroup gained full control of
the firm in 2006 when it bought out its partner in the business,
Itau Unibanco. Citigroup paid 280 million reais for Itau's 50%
stake. At the time, the Brazilian bank said it wanted to focus on
developing its own credit-card division.
Write to Rogerio Jelmayer at rogerio.jelmayer@dowjones.com
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