Financial services giant Citigroup (NYSE:C) is pursuing a portfolio sale in China. The firm is in the process of offloading its onshore consumer wealth portfolio, encompassing its client base, assets under management (AUM), and deposits, to its rival HSBC (NYSE:HSBC)(GB:HSBA).
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The financial terms of the deal were not disclosed. However, it covers total deposits and investment AUMs of about $3.6 billion. Further, Citigroup expects the transaction to close in the first half of 2024.
While Citigroup will exit its consumer franchise in China, it will retain its institutional businesses, where it has a leading position. Citigroup announced in December 2022 that it would wind down its consumer banking business in China. This strategic move aligns with Citigroup’s broader global strategy to reduce its consumer banking presence in 14 markets spanning Asia, the Middle East, Europe, Africa, and Mexico. Let’s delve deeper.
Citigroup’s Global Consumer Banking Strategy
Back in April 2021, Citi said that it plans to allocate investments and resources to areas where it can achieve scale and growth in the consumer banking business. Consequently, the firm plans to discontinue its consumer banking operations in 14 markets and concentrate exclusively on four affluent hubs, including Singapore, Hong Kong, the UAE, and London.
Investors should note that Citi has sold its consumer franchises in eight markets: Australia, India, Bahrain, Malaysia, Taiwan, Thailand, the Philippines, and Vietnam.
Besides for China, Citi intends to complete its consumer business sales in Indonesia later this year. Also, its exit from consumer business in Korea and the overall closure of operations in Russia are underway.
Citigroup intends to phase out its consumer operations in these markets due to a lack of sufficient scale to compete effectively in these regions. Further, it plans to put capital and resources in areas offering high-growth opportunities, such as wealth management and institutional ventures. While the company is focusing on high-growth opportunities to drive its earnings, let’s look at what analysts recommend for its shares.
What is the Price Target for Citigroup?
Wall Street analysts are cautiously optimistic about Citigroup stock. Increased competition to drive deposits, higher deposit costs, and lower activity in the investment banking segment pose challenges in the short term.
Citigroup stock has received six Buy, 11 Hold, and one Sell recommendations for a Moderate Buy consensus rating. Further, analysts’ average price target of $51.19 implies 26.18% upside potential from current levels.
