For banks and other financial institutions to remain profitable during these challenging economic times, they have to cut their losses at every possible turn. For Citigroup, that means selling off its consumer business in developing countries, such as Brazil and Argentina. The reason for this is simple: these regions bring down the overall profitability of the bank. Shareholders must be pleased, after all, as clients in those countries are only collateral damage.
Citigroup Sells off Several Consumer Businesses
The past 72 hours have been quite profitable for Citigroup, although not for reasons most people would expect. The financial group has successfully sold off its consumer business in Argentina. Banco Santander is taking over these clients for an undisclosed amount. This news comes on the heels of Citigroup selling part of its Brazilian retail banking assets as well.
To put this into perspective, Brazil and Argentina are two countries where financial inclusion needs to be improved significantly. When players such as Citigroup bail on those markets, it has become apparent that they are not making enough profit fast enough to please shareholders. The group had stated those subsidiaries would be liquidated to “boost profitability”.
Among the items being acquired by the new owners are assets, credit card businesses, retail brokerage packages, and personal loans. All of these pillars of financial stability will now become part of the other banks, while Citigroup turns its back on customers in Brazil and Argentina. As a result of both sales, the financial giant will pocket close to US$1.5bn, although those numbers have not been officially confirmed.
Financial inclusion in developing countries is an absolute must. While there are consumers who will prefer the anonymity of dealing with cash only, the vast majority would love to have access to essential financial services. This includes a bank account, payment cards, and loans or insurance providers.
Developing countries are flocking to Bitcoin as a way to solve financial inequality. Citigroup once again goes to show that major financial providers do not care all that much about these regions, as they are not providing optimal profitability by any means. This is an interesting development for sure, although it goes to show that clients are nothing more than numbers on a balance sheet for financial service providers.
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