New York-based Citigroup has announced it will withdraw from the French retail banking market completely next year, after scaling back its operations in the country. One-hundred years after opening its first French branch, the world-leading US bank believes the environment is too competitive. Citigroup had 30 outlets at its peak, and the last one, on the Champs-Elysees in Paris, will be gone by next spring.
Citi regards the French retail banking market as one of the toughest in Europe for foreign banks – extremely difficult to enter and already well covered by local banks. BNP Paribas, Crédit Agricole and Société Générale are the leaders in the sector.
However, the retreat is incomplete. Citigroup is building up its business in other financial services in the country, as part of its strategy to raise overseas revenues, particularly in commercial banking,investment banking, financial trading and holding shares for clients.
With Citi’s weaker-than-expected results for the second quarter, for which its consumer business has taken a big portion of the blame, it is not difficult to understand why the US bank wanted to completely cut a loss-making business.
Although some analysts admitted that it had been too aggressive given the difficult capital markets conditions in the past couple of months, shareholders are unhappy with Citigroup’s recent results – some less than others.
Prince Alwleed bin Talal is the bank’s largest shareholder and has had interests in the company for the past 15 years. He has urged the company to cut its cost over-runs, pointing out that of the 16 points of cost growth reported by Citigroup, 12 were caused by organic business growth and acquisitions, compared with a 10-point growth in revenues. Another large shareholder has said that unless Citigroup manages to get its stock price up soon, the pressure for splitting up the group will increase.
HSBC’s PANAMA PURCHASE:
The world’s second largest bank HSBC has acquired Banistmo, one of Panama’s biggest players, for $1.77bn in cash to expand its Latin American operations. Banistmo has 220 branches in Panama, Costa Rica, Honduras, Colombia, El Salvador and Nicaragua.
Private investors might for the first time take a stake in one of Germany’s biggest state-backed banks. WestLB has started advanced talks to sell its 27% stake in HSH Nordbank, another state-backed German bank, to private investors.Firms reportedly eyeing HSH Nordbank are Hellman & Friedman, JC Flowers, Cerberus and Corsair.It is believed that the stake in the German bank could be priced up to €1.5bn.
London-based Standard Chartered has progressed with negotiations to acquire Pakistan’s Union Bank in a deal that could be the biggest foreign acquisition ever in the country’s banking sector. Union Bank has 53 branches across Pakistan and had a net profit of Rs1.74bn (€23m) in 2005, more than double 2004’s figure.
CHINESE RURAL BANK:
Dutch Rabobank Group and the International Finance Corporation have signed a deal with a Chinese bank on an equity investment, making them the first overseas investors in a Chinese rural cooperative bank.
Radobank will acquire 10% of United Rural Cooperative Bank of Hangzhou, while IFC will acquire 5% of the Chinese bank’s capital.
Milan-based Banca Leonardo has announced it is expanding on the other side of the Alps. The investment bank formed only a year ago by Gerardo Braggiotti, after leaving his previous position of deputy chairman at Lazard, has taken over French Toulouse & Associates, entering the French market and launching competition to Mr Braggiotti’s former employer.
Spanish Banco Sabadell has announced the sale of its Panama retail banking subsidiary Banco Atlantico Panama for $96m to Grupo Financiero Continental, one of Panama’s leading banks. Banco Sabadell will use the proceeds of the sale to fund the acquisition of another Spanish bank, Banco Urquijo, for €762m.The deals are in line with Banco Sabadell’s intention to focus on the domestic market.
Grupo Santander, Spain’s largest bank, has taken its first step in Russia with the acquisition of an as yet unnamed bank in car financing for €40m. The Russian bank has offices in Moscow and St Petersburg.
US investment bank Giuliani Capital Advisors is to enter a strategic partnership with German investment bank Sal Oppenheim and French specialist Aforge Finance to work on medium-sized mergers and acquisitions. The New York-based firm is the investment business of Giuliani Partners, owned by the city’s former mayor Rudolph Giuliani. The agreement also includes New Stone Capital and China M&A Management Holdings, two Chinese investment banks.
ANZ Banking Group, Australia’s second largest bank by Tier 1 capital, has bought a 20% stake in China’s Tianjin City Commercial Bank for $111.5m. ANZ plans to expand its presence in China and secured the deal for some $10m less than initially announced last December.
Dutch bank ABN AMRO is launching a guaranteed capital bond called ‘Campioni del Mondo 2006’ (World Champions 2006) to celebrate Italy’s World Cup victory this summer.
