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Is Citi (C) Mulling Sale of Asia Credit Card Payment Business?

Continuing with the strategy of divesting non-core operations, Citigroup Inc. C intends to vend its Asia credit card payment processing business, according to Reuters. Notably, Hong Kong, Singapore and India account for around 70% of the unit’s business.

As per the source, Credit Card Merchant Acquiring business of Citigroup serves thousands of merchants in Asia, generating gross revenues of $400 million through providing credit and debit card payment processing services.

Citigroup exited merchants acquiring businesses in other regions in 2005, Asia being the last market from where it plans to exit. Notably, Citigroup recorded revenues worth $2.6 billion from its credit card business in Asia.

However, Citigroup refrained from disclosing anything on the matter.

The company's long-term strategy to prune its non-core assets and increase its fee-based business mix would improve valuation over time. The rundown of Citi Holdings, its legacy problem assets portfolio, is on track. Notably, at the end of first-quarter 2016, Citi Holdings’ assets decreased 44% year over year and represented just 4% of the company’s total assets. These runoffs will ultimately reduce the company's risk profile and free up capital for investment in its core businesses.

Conclusion

Amid various adversities, Citigroup’s decision to vend its non-core assets will lend it some financial flexibility. We believe that the company is well positioned to resolve its internal inefficiencies and setbacks. Further, we believe these streamlining initiatives will bolster the company’s capital position, reduce expenses and drive operational efficiency.

Citigroup currently carries a Zacks Rank #5 (Strong Sell). Better-ranked companies in the finance space include The Bank of New York Mellon Corporation BK, Enterprise Financial Services Corp. EFSC and Peoples Bancorp Inc. PEBO. All the three companies carry a Zacks Rank #2 (Buy).

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