Citigroup is seeking buyers for CitiFinancial, the largest consumer finance company in the US, in a deal that could raise hundreds of millions of dollars and mark a milestone in the bank’s efforts to break with its troubled past.
People close to the situation said that after months of restructuring, Citi had begun contacting potential buyers for CitiFinancial, which was one of the building blocks in its ill-fated plan to become an all-purpose “financial supermarket”.
Citi declined to comment, but people with knowledge of the process said that talks with likely bidders, which could include private equity groups and other finance companies, were at an early stage and no deal was imminent.
Wall Street executives who have looked at the business said CitiFinancial could fetch up to $1 billion but warned that the final price would depend on the financing package Citi offers to potential buyers to help fund the business.
Similar assets have attracted broad interest from private equity in recent months. In August, Fortress Investment Group won the auction to buy American General Finance, the consumer finance arm of AIG , the beleaguered US insurer.
Others who expressed interest in the American General business included JC Flowers and TPG, who have raised funds to take advantage of the fallout from the financial crisis. Buy-out firms such as KKR , Blackstone , Centerbridge and Cerberus have looked at similar assets.
CitiFinancial has 1,500-plus branches and some 2m customers but was hit hard during the crisis as the lower-income people it targeted defaulted on personal and residential loans and funding markets froze.
Citi, which suffered some $50 billion in losses during the turmoil and was bailed out by the US government, responded by placing the unit into CitiHoldings – a collection of businesses earmarked for sale.
Last year, Citi closed down more than 300 CitiFinancial branches, stopped making loans at another 184 and rebranded the remaining 1,500 outlets OneMain Financial.
A sale of CitiFinancial would help to shrink CitiHoldings, whose $421 billion in assets accounted for more than 20 percent of the overall group’s balance sheet at the end of September.
But it would also underline the dramatic shift in Citi’s strategy since 2000 when Sandy Weill, then the bank’s chief executive, paid $31 billion in stock for Associates First Capital, a CitiFinancial predecessor whose businesses included consumer loans and credit cards.