Citigroup Inc. (C) is expanding its retail banking activities in Russia by acquiring a part of the Russian banking business of HSBC Holdings Plc. (HBC). The sale, which is expected to be completed in the third quarter of 2011, involves assets worth about $10.7 million.
HSBC divestiture is part of its effort to concentrate on its commercial and wholesale banking operations. In this context, HSBC had announced the intention to close its retail and private-banking units in Russia in April.
The expansion is a strategic fit for Citi, which is aiming to grow its business in international markets. 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.
Recently, Citi also announced definitive agreements with China’s Orient Securities Company Ltd. to form a securities joint venture to operate in that domestic market. The joint venture, in which Citi will own a 33% stake and Orient will own the remainder, will carry out investment-banking business in the Chinese domestic market, including equity and debt underwriting as well as 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 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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