Citigroup and Redecard: shedding international assets

Citigroup is looking to raise capital and shed assets in order to deleverage and prevent a worst-case outcome for the financial institution. Case and point is the fact that the company is putting its Brazilian subsidiary Redecard on the block for sale. What remains unclear is whether Citi is making these moves just to stave off a worst-case outcome (i.e. bank failure). These sales certainly make the company easier to sell or nationalize.

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Citigroup is looking to raise capital and shed assets in order to deleverage and prevent a worst-case outcome for the financial institution. Case and point is the fact that the company is putting its Brazilian subsidiary Redecard on the block for sale:

Citigroup Inc., the New York-based bank bailed out by the U.S. for $52 billion, plans to sell its stake in Brazilian credit card processor Redecard SA through a public offering, according to a securities filing.

Citigroup registered with Brazil’s securities to sell shares of the Sao Paulo-based company, without setting a price for the offering, according to the filing from Redecard. Citigroup owns 17 percent of Redecard, a stake worth 2.94 billion reais ($1.24 billion) based on today’s closing price.

Chief Executive Officer Vikram Pandit is shedding Citigroup’s businesses to free up capital after the bank posted a record $18.7 billion loss in 2008. Last month he said he planned to sell the bank’s CitiFinancial consumer-finance and Primerica life-insurance units as soon as the market permits, and struck a deal to sell majority control of the bank’s Smith Barney brokerage to Morgan Stanley.

Redecard, the Brazilian processor of payments for Mastercard Inc., is down 6.5 percent in the past 12 months, compared with a 41 percent drop in Brazil’s Bovespa index. The stock climbed 3.89 reais today to 25.66 reais. Citigroup shares, which have plunged 90 percent in the past year, dropped 3 percent today to $2.52.

Citigroup spokesman Mike Hanretta in New York didn’t immediately return a call for comment.

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A few days ago, I noted that Citi had stopped lending in Denmark and had cut credit lines in the UK. This is all part of a push by Citigroup to shed non-core assets. Reports that Citi is to get rid of Nikko Citigroup in Japan are hitting the headlines as well.

What remains unclear is whether Citi is making these moves just to stave off a worst-case outcome (i.e. bank failure). These sales certainly make the company easier to sell or nationalize.

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Citi to Sell Redecard Stake in Brazil Public Offer – Bloomberg.com

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