Crédit Mutuel buys Citi German units for €4.9bn

interesting !....

Crédit Mutuel buys Citi German units for €4.9bn
By Francesco Guerrera in New York, James Wilson in Frankfurt and Peter Thal Larsen in London
Published: July 11 2008 08:54 Last updated: July 11 2008 08:54

Citigroup on Friday said it had agreed to sell its German retail banking operations to Crédit Mutuel for at least €4.9bn after the French bank outbid Deutsche Bank in a close race.
The disposal of Citi’s German retail unit, whose origins date back from 1926, will mean an after-tax gain of about $4bn for the US financial services group and is part of attempts to shed non-core assets and keep a tighter rein on capital and expenses.
Vikram Pandit, Citi’s chief executive, has a radical plan to sell up to $500bn in unwanted assets to try to boost Citi’s profitability and help the company recover from the huge losses suffered during the credit crisis.
“This is a further strategic step in our efforts to reorganise Citi and strengthen our balance sheet,” he said.
Citigroup will retain a large presence in Germany through its corporate and investment bank but Mr Pandit decided that the retail operation did not have the critical mass or the strategic fit to remain part of the group.
The bank said the sale “reflected the clear goal to redirect capital towards core business areas and emerging growth markets”.
People close to Citi said the bank’s management was considering selling branch networks in other European and African countries where it was not big enough to compete with local and international rivals.
Crédit Mutuel’s acquisition of Citi’s retail network, one of the most successful consumer banking operations in Germany, will catapult the French bank to a prominent position in a country where most retail deposits are held by state-run savings banks or local mutual banks.
Citi’s retail business, which serves mainly affluent customers, claims to be the country’s leader in consumer credit with a market share of about 7 per cent.
The acquisition represents a bold cross-border move for Crédit Mutuel, which had maintained a low profile outside France.
Analysts say it is the first significant move for Crédit Mutuel - France’s fourth-largest bank by assets - since it acquired CIC, a regional banking network from the French government in 1998.
Crédit Mutuel is paying €4.9bn to Citi and an additional sum based on the German operations’ earnings this year until the transaction closes, which is expected to be in the fourth quarter. Citigroup’s net income from the German retail business was €365m in 2007.
Deutsche Bank had been seen as a strong contender, partly because it could have combined Citi’s business with its huge retail network in Germany, creating opportunities to cut costs.
However analysts said foreign bidders such as Crédit Mutuel and Banco Santander, which dropped out of the race earlier, had a bigger incentive than Deutsche to pay up for Citi’s business because they were eager to expand in Germany.
The Citi/Crédit Mutuel deal will increase speculation that Deutsche Bank may turn its attention to Deutsche Postbank, Germany’s biggest retail bank, which has been put up for sale by Deutsche Post, its majority owner.
The field of possible contenders for Postbank has narrowed, with Lloyds TSB dropping out of the running. Commerzbank and Dresdner Bank, which had been exploring a three-way tie up with Postbank, are thought now to be more interested in a simpler, bilateral deal.
Copyright The Financial Times Limited 2008