Citigroup Inc.'s (NYSE:C)
sale of Nikko Asset Management, announced Thursday, was not a keen strategic move as it greatly reduces the bank's presence in the second-largest economy in the world, Dick Bove, an analyst at Rochdale Securities, tells The Deal. But, Bove points out, chief executive Vikram Pandit (pictured) had no other choice.
"He needed the money," says Bove. "What was he going to do?"
The chief executive's focus on foreign economies (other than Japan, obviously) and shedding of noncore assets puts Citigroup -- which has long been a vessel of bad decision-making and abrupt strategy shifts, Bove contends -- back on the right track.
Similarly, Richard Staite, banking analyst at Atlantic Equities LLP in London,
told Bloomberg, "The faster [Citi] can sell off their non-core assets and
focus on core banking operations, the better. Many investors see Citigroup as being too big and too diverse.
They want to see the bank focus on core banking operations."
Upon announcing the Nikko deal, in which Citi will sell a 64% stake in the Japanese asset management arm to Sumitomo Mitsui Financial Group for $800 million, Pandit
stated that he thinks foreign markets offer the best opportunity for Citigroup to build back up its capital base and that he thinks in the future, Citicorp, Citigroup's core business, will derive half of its business from emerging markets, the news service reports.
Pandit also said that Citi plans to set up a standalone Islamic banking subsidiary in Malaysia. He was recently in Singapore to "connect with employees and clients and conduct business in a key region for Citi."
Citi's selling spree, which has included the majority of its brokerage Smith Barney, its German retail banking unit, its back-office operations in India and a portion of its Brazilian credit card unit, successfully pushed the wounded bank
into the black in the second quarter, surprising analysts. (Subscribers to
The Deal Pipeline may read more of Citigroup's transactions here.) -
Sara Behunek
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