Citigroup mulls sale of German retail operations

Citigroup is looking to sell its German retail banking operations as part of the radical steps being taken by Vikram Pandit, chief executive, to scale back his company’s operations in the wake of the credit crisis.The business is one of the most successful consumer banking operations in Germany and analysts said a sale could raise €4bn-€5bn ($6.2bn-$7.7bn).

A sale, which would attract interest from domestic rivals as well as international banks keen for a foothold in the country, would make Citi the first bank to withdraw from an important territory in the aftermath of the global financial crisis.

The German operation is among Citi assets deemed non-core by Mr Pandit, who said this month he intended to cut the bank’s assets by up to $500bn in an attempt to increase returns.

“The process has been initiated,” said a person familiar with the plan.

Citi has been in Germany since 1926 but Mr Pandit has repeatedly said the bank could not afford “hobbies” – businesses that lacked critical mass or a strategic fit with the rest of the conglomerate.

The German sale would be one of the largest disposals to date. A bank spokesman in Germany said: “We are exploring a variety of options for our retail banking business in Germany. No decision has been made.”

Citi also runs Frankfurt-based corporate and investment banking operations, which are not being considered for disposal.

The bank has about 3.25m retail customers in Germany and claims a leading position in the consumer credit market. It made net income in 2007 of €365m but has complained of increasing competition.

A sale would fuel expectations of bank consolidation in Germany where the retail banking market is highly fragmented and many banks are keen to increase their market share.

Deutsche Postbank, the leader with 14.5m customers, is likely to be sold by Deutsche Post, its majority owner. Meanwhile,Allianzthe, insurer, is restructuring its Dresdner Bank subsidiary so it can “play an active role” in consolidation.

Citi says its retail operations have been the most profitable in Germany during the past decade in terms of return on equity.

Georg Kanders, an analyst at WestLB, said the business would be of interest to Deutsche Bank, Germany’s biggest bank.

Citi’s retail bank in Germany employs about 6,800 people and runs 340 branches.