Citi selling $1.6B in retail sales finance assets to GE Capital as it focuses on core assets

Wednesday, October 6, 2010

Citi selling $1.6B consumer finance assets to GE

NEW YORK — Citigroup is selling $1.6 billion in retail sales finance assets to GE Capital as the bank continues to restructure its business to focus on core consumer banking operations.

The assets being sold to GE consist of consumer financing portfolios for select small to mid-sized merchants in the home furnishings, flooring, consumer electronics and heating, ventilation and air conditioning industries across the U.S.

The assets are part of Citi’s $50 billion retail partner cards business, which services more than 40 million customers and includes relationships with retailers such as The Home Depot, Shell, Macy’s, Sears, and ExxonMobil. These large retailers aren’t included in the transaction.

“Selling these assets enables us to streamline the strategic operating model, including our bank legal vehicles and operating platforms, for the Retail Partner Cards business,” said Bill Johnson, CEO of Citi’s Retail Partner Cards division. “Going forward, we are better positioned for future growth as we continue to partner with premier brand retailers across a broad spectrum of industries and retailing specialties.”

The New York-based bank, which was one of the top recipients of federal bailout aid, is restructuring operations as it recovers from the recession and credit crisis. In preparation for unraveling the one-stop financial services marketplace model it created in the late 1990s, Citigroup Inc. last year split itself into two parts — Citicorp and Citi Holdings. The latter holds the retail card portfolio and other riskier assets including the mortgage-backed securities that undermined the bank and other financial institutions during the market meltdown.

Citi recently said it was exiting the private student loan business, selling its 80 percent stake in Student Loan Corp. and about $32 billion in related assets to Discover Financial Services and the student lender Sallie Mae. In June, Citi sold $3.2 billion in auto loans to Spain’s Banco Santander and divested its Canadian MasterCard business to Canadian Imperial Bank of Commerce, trimming its assets by about $2 billion.

GE Capital said the Citi portfolios being acquired include nearly three-dozen retail partner relationships that collectively represent more than 18,000 small to mid-sized Main Street merchant locations across the U.S. Citi will service the portfolio until the first quarter as GE Capital finishes converting merchants and cardholder accounts to its system.

“This acquisition is right in line with GE Capital’s goal to invest in core, high performing growth businesses where we have deep experience and broad capabilities to grow,” Mark Begor, president and CEO of GE Capital Retail Finance, said in a statement.

GE Capital, the financing arm of General Electric Co., also was devastated last year by the financial meltdown but has seen profits strengthen in recent quarters. Its second-quarter earnings rose 93 percent to $830 million as units that provide loans for businesses, store credit cards and energy projects improved. GE Capital’s lending for office buildings and other commercial properties has continued to suffer losses, however.

Terms of the deal with were not disclosed, but the companies said Wednesday that the sale has received regulatory approval.

Shares of Citigroup Inc. closed down 3 cents at $4.10. Shares of Fairfield, Conn.-based GE added 39 cents, or 2.4 percent, to finish at $16.90.

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