Citi sells unit to Credit Mutuel

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Jul 11 : Citigroup Inc, the largest US bank, agreed to sell its German consumer unit to France’s Credit Mutuel Group for 4.9 billion euros ($7.7 billion) to shore up capital.

The Paris-based customer-owned bank will pay the amount in cash, plus the equivalent of Citibank Privatkunden AG’s 2008 earnings, New York-based Citigroup said in a Business Wire statement today. Credit Mutuel, France’s second-largest bank by branches, gains the market leader for consumer loans in Germany with 340 branches and about 3.2 million clients.

Citigroup, reeling from losses on subprime-infected assets, is selling the unit as chief executive officer Vikram Pandit disposes of $400 billion of assets. Credit Mutuel beat out Deutsche Bank AG, Germany’s biggest bank. The sale of Citibank may be the first in a wave of takeovers in Germany because Deutsche Postbank AG, the country’s biggest consumer bank by clients, and Allianz SE’s Dresdner Bank are also up for sale.

“Citibank gives the French lender a great foothold in the German retail market,” said Konrad Becker, a Munich-based analyst at Merck Finck & Co. “Now Deutsche Bank will have to concentrate on getting Postbank.”

Deutsche Bank CEO Josef Ackermann needs to expand more stable businesses such as consumer banking and asset management to offset a decline in investment banking. The Frankfurt-based bank is bidding for Postbank to gain its 14.5 million customers and 850 branches.

Deutsche Bank last week agreed to buy commercial-lending units in the Netherlands for 709 million euros from Fortis. It also bought German lenders Norisbank and Berliner Bank for 1.1 billion euros in 2006.

“The sale of Citibank eliminates one more option and makes Postbank that more attractive,” said Robert Minde, an analyst at BHF-Bank AG in Frankfurt. “Postbank would fit Ackermann’s strategy of bolstering the stable businesses.”

Takeovers will shake up financial services in a market still dominated by state-owned lenders where “tooth-and-claw” competition has sapped profitability, Citigroup analysts said in a February report.