Citigroup Inc. (C) is planning to expand its business in Brazil and intends to add around 50 branches in the country by 2015. This would increase its current network, which stands at 103 branches in Brazil in an effort to increase its checking-account holders by 80% through 2015, according to a Bloomberg report that referred to a Sao Paulo-based Valor Economico newspaper report.
The expansion is a strategic fit for Citi, which is aiming to grow its business in international markets, particularly in the emerging economies. The company’s core business unit, Citicorp, generated 62% of its revenues and 72% of its net income from its international operations in the first quarter of 2011.
Citi has stepped up hiring activity in Brazil to drive growth and capitalize on trade improvement and higher cash inflows in the country. Brazil had witnessed an increase in merger and acquisitions volume, equity and debt issuance in 2010, providing enough ground for Citi to leverage them for growing its business.
Last week, Citi also announced plans of entering into definitive agreements with China’s Orient Securities Company Ltd to form a securities joint venture to operate in the Chinese domestic market. The joint venture in which Citi will own 33% stake and Orient will own the remainder, will engage in investment-banking business in the Chinese domestic market, including equity and debt underwriting and advisory services.
With this, Citi joined other Wall Street biggies such as J.P. Morgan Chase & Co. (JPM) and Goldman Sachs Group Inc. (GS) to foray into the Chinese market with joint ventures.
We believe that such strategic expansions and partnerships will enhance Citi’s global network going forward and boost its revenue base by leveraging on faster-growing emerging economies, thereby increasing its market share internationally.
Citi currently retains its Zacks #3 Rank, which translates into a short-term Hold rating. Also, considering the fundamentals, we maintain a long-term Neutral recommendation on the stock.
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