Citigroup Inc. C is set to further shrink its Japanese footprint. The Wall Street banking giant is in final discussions to vend its Japanese credit-card unit to Sumitomo Mitsui Trust Bank Ltd, per a Bloomberg report. The deal is likely to be valued within 40 to 45 billion yen.
Sumitomo Mitsui Trust Bank, a unit of Tokyo-based Sumitomo Mitsui Financial Group, Inc. SMFG, intends to finalize a deal to acquire Citi Cards Japan Inc. Citi Cards operates the Diners Club brand in Japan – one of the oldest credit card brands in the world – operational since 1960.
The news first reported by Nikkei newspaper, stated that an announcement by Sumitomo Mitsui Trust is likely to be made in this month, disclosing the details of the deal.
Last December, the New York based-bank announced a deal to sell its retail banking operations in Japan to Sumitomo Mitsui which is expected to close in Oct 2015. (Read more: Citigroup to Vend Japan Retail Business to Sumitomo Mitsui). The latest revelation does not come as a surprise as during this announcement, Citigroup stated that it was exploring a possible divestment of its Japanese credit card business.
With the acquisition of Citigroup’s credit card business which has around 750,000 customers, Sumitomo Mitsui intends to boost its high income clients business.
The probable offloading of Credit card business is in line with Citigroup’s strategy to streamline international operations to boost profits. Last October, the company stated that it proposes to exit the consumer banking business in 11 markets.The 11 markets include Japan, Nicaragua, Panama, Costa Rica, El Salvador, and Guatemala among others.
Citigroup expects to significantly complete its strategic actions by the end of 2015. The move aims to focus on markets where it has a strong presence and long-term growth prospects.
Bottom Line
We remain encouraged as Citigroup continues with its repositioning and restructuring initiatives while remaining focused on resolving several internal setbacks, including legal issues. We believe that these streamlining initiatives will bolster the company’s capital position, reduce expenses and drive operational efficiencies.
Citigroup currently carries a Zacks Rank #2 (Buy). A couple of well-ranked stocks in the finance space include Customers Bancorp, Inc. CUBI and Pinnacle Financial Partners Inc. PNFP. Both the stocks sport a Zacks Rank #1 (Strong Buy).
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