Scars of the 2008 meltdown are still in the process of healing. One of the survivors of the Great Recession, Citigroup (NYSE: C ) , continues to chip off its areas of operation that don't really fall under its core business. In addition to the 4,500 recently announced job cuts, the company has decided to do away with its retail banking operation in Belgium by selling it to Credit Mutuel Nord Europe for an undisclosed price.
The story so far
Since the foundation of a business rests on profitability, it only seems logical to move out of activities that are not profitable. The financial crisis of 2008 made a lot of banks rethink their strategies. After Citigroup was bailed out by the government for $45 billion in 2008, its pruning of its non-core activities makes sense. Citi Holdings has reduced its assets by $582 billion since the crisis.
Cost-cutting and strategic restructuring measures are being taken across the banking arena. Last month, Bank of America (NYSE: BAC ) , which was also bailed out by the U.S. government, continued its ongoing diet by selling off $1 billion of credit card loans. Back in August, HSBC Holdings (NYSE: HBC ) sold off its entire credit card arm in the U.S. and all of its branches in New York. It even made gains of $2.4 billion from the sale of its credit card business to Capital One.
A couple of weeks before the sale, Moody's had downgraded Belgium to Aa3. The rationale behind this decision was attributed to high levels of public debt and increasing medium-term risks to the economic growth of the country. Around the same time, Fitch also placed Belgium under Rating Watch Negative. Last month, the Belgian Debt Agency sold treasury bills worth $3.2 billion, enabling the government to finance its deficit mainly from domestic savings.
All of this possibly indicates a reduction in disposable funds available with retail consumers in the country. Moreover, the current European debt crisis does nothing to build business confidence in the eurozone.
Interestingly, Citigroup will continue in Belgium with its Institutional Banking and Global Transaction Services franchises. It seems like a good move in light of its presence in the country since 1919 and a client base of about 500,000.
The Foolish bottom line
Going by the state of affairs in the country, the condition of the European economy, and the general trend in the banking industry where less-profitable units are being sold off, the Belgium sale appears to be a strategic move. Two things to watch out for in the coming months: the future of Citi's other arms in Belgium, and the fate of Citigroup's retail banking divisions in other countries.
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