Citigroup Inc. (C) is nearing a deal with China's Orient Securities Co. to form a securities business joint venture (JV), according to a Securities Times report. Citi is reportedly said to be signing the agreement with Orient as early as this month.
In an effort to explore the thriving economy in China and a booming capital market, U.S. and U.K. banks are making efforts to set up JVs in that country. If this deal materializes, Citi would join the bandwagon of banks such as J.P. Morgan Chase & Co. (JPM), Goldman Sachs Group Inc. (GS), UBS AG (UBS) and Deutsche Bank AG (DB) to have set up such JVs in China.
The JV in China is a strategic fit for Citi, which is aiming to grow its business in international markets and 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.
Earlier this week, Citi and Bank of Baghdad, a subsidiary of Kuwait's Burgan Bank, entered into a strategic alliance. The partnership will provide cash management requirements and other related banking services to corporate clients with major business in Iraq. The deal will help the company to fulfill its commitment to Iraq as well as maintain its strategy to meet clients’ needs through its own global network and partnerships with prime local banks.
Going forward, we believe that such strategic partnerships will enhance Citi’s global network and boost its revenue base by leveraging on faster-growing economies like China, 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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