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Citigroup (C) Receives Interest for Russia Operations' Sale

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Citigroup Inc. C is reportedly negotiating with local buyers and privately-owned Russian companies, including Expobank and insurance company Reso-Garantia, for the sale of its operations in Russia. This was first reported by Financial Times, citing people with knowledge of the matter who asked not to be identified.

Markedly, with the Russia economy being restricted from the global financial system due to its Ukraine invasion, Citigroup announced in mid-March that it would retract its business from the country. Numerous banks with a significant footprint in Russia have eyed opportunities to exit Russia since the war started and western sanctions made operating there increasingly difficult.

If the sale is closed, Citigroup will become the second Western lender to pull the plug from its Russia business. In April, French bank Societe Generale made a deal to sell Rosbank to Interros Capital. Nonetheless, Citigroup will likely retain its license and maintain a stripped-down presence in Russia.

While the company announced plans in April 2021 to sell its global consumer business in Russia and other 12 markets, it has broadened the scope of the planned exit and will fold up other lines of business in the country. This implies that Citigroup would also give up its institutional and wealth management business in Russia.

In line with efforts to reduce its remaining operations and exposure in the country, the company stopped soliciting any new business or clients. It is also offering assistance to multi-national corporations in the complicated task of unwinding their operations.

While Citigroup continues to manage existing regulatory commitments and obligations, “due to the nature of banking and financial services operations,” the company’s exit from Russia is expected to be a time-taking process.

Notably, the bank is making efforts to simplify operations and reduce costs. In January 2022, the company revealed plans to exit the consumer, small business and middle-market banking operations in Mexico. This is in addition to its major strategic action announced in April 2021 to exit the consumer banking business in 13 markets across Asia and EMEA, including Australia, Bahrain, China, India, Indonesia and Korea.

Since then, the company has signed deals to sell nine consumer businesses in Australia, Indonesia, Malaysia, Philippines, Thailand, Taiwan, Vietnam, India and Bahrain, and has completed the sale of its Australia consumer business. It also plans to gradually wind down its consumer banking business in South Korea.

Such exits will free up capital and help the company pursue investments in wealth management operations in Singapore, Hong Kong, the UAE and London to stoke growth. Citigroup anticipates the release of $12 billion (in aggregate) of allocated tangible common equity over time from such market exits. The efforts will likely help augment its profitability and efficiency over the long term.

Citigroup currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Shares of the bank have lost 25.4% over the last six months compared with the 27.3% decline of the industry.

 

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Inorganic Growth Efforts by Other Banks

First Bancorp FBNC announced that it signed a definitive merger agreement to acquire GrandSouth Bancorporation in an all-stock transaction. The deal is valued at $181.1 million or $31.43 per share, based on FBNC’s stock price as of Jun 17, 2022.

At closing, shareholders of GrandSouth will receive 0.910 shares of FBNC’s common stock for each share of GrandSouth's common and preferred stock they own.

Given GrandSouth’s footprint of eight branches in South Carolina, the acquisition enables First Bancorp to scale in its targeted markets, including Greenville, Fountain Inn, Anderson, Greer, Columbia, Orangeburg and Charleston. With a focus on small business banking, the acquisition complements First Bank's strengths in that area.

F.N.B. Corp FNB signed an agreement to acquire Greenville-based UB Bancorp to bolster its presence in North Carolina. The all-stock deal is valued at $19.56 per share or nearly $117 million, based on the closing stock price of FNB as of May 31, 2022.

Following the deal completion, expected in the last quarter of 2022, F.N.B. Corp will likely move to the eighth position in North Carolina in terms of deposit market share. Also, the cost of deposits of 11 basis points will be accretive to the company’s financials in a rising rate environment.


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