In continuation of its strategy to trim international operations, Citigroup Inc. C is set to offload its consumer and commercial banking business along with its insurance operations in El Salvador to Grupo Terra. Financial terms of the deal remained undisclosed.
As per the deal, the Honduras-based investment group Grupo Terra will acquire a bulk share of Banco Citibank de El Salvador, S.A., Citi Tarjetas de El Salvador, S.A. de C.V., as well as insurer Seguros e Inversiones, S.A. (SISA) and other associated companies. Notably, the deal excludes the Citibank, N.A. branch in El Salvador. Currently, the deal is subject to regulatory approval by the Salvadoran authorities.
For Grupo Terra, whose investments are primarily concentrated in the areas of renewable energy and the marketing of petroleum-derived products, the deal is line with its strategy to diversify its business. Notably, the deal marks entry in the financial sector for the first time for the company. Currently, Grupo Terra has about 258 employees in El Salvador, where it has presence since 2008.
Upon closure of the deal, Citigroup, which has presence in El Salvador for over 51 years, will continue to operate its corporate and investment banking business.
The latest deal of Citigroup is not surprising, as the company, which has already retreated from some global markets, announced “strategic actions” in October 2014. The company stated that it proposes to exit the consumer banking business in 11 markets.
Apart from El Salvador, the markets include Nicaragua, Panama, Costa Rica, Hungary, Guatemala, Japan, Guam and its consumer finance business in Korea and the Czech Republic, Egypt. Citigroup expects to significantly complete its strategic actions by the end of this year. The move comes in line with its strategy to focus on markets where it has a strong presence and long-term growth prospects.
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 #4 (Sell). Some better-ranked stocks in the finance space include The PNC Financial Services Group, Inc. PNC, Franklin Financial Network, Inc. FSB and New York Community Bancorp Inc. NYCB. While PNC Financial carries a Zacks Rank #2 (Buy) both Franklin Financial and New York Community sport a Zacks Rank #1 (Strong Buy).
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