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Citigroup Sees a Post-Coronavirus Opportunity in Commercial Lending

By Eric Volkman – Jun 9, 2020 at 6:30PM

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The big bank is particularly targeting the EMEA region.

Somewhat counter to the current conservative trend in big banking, Citigroup (C -1.78%) plans to expand its commercial loan book -- at least in a major market abroad. A Reuters article published Monday revealed that the major U.S. bank hopes to beef up its business lending unit, which focuses on enterprises with annual revenue of $25 million to $2.5 billion.

Specifically, Citigroup's target is its Europe, Middle East, and Africa (EMEA) operational region, with an emphasis on Europe.

Outside of a Citigroup building

Image source: Citigroup.

Reuters quoted the company's EMEA commercial banking chief Ray Gatcliffe as saying that; "[i]f you look at European banks right now, many are refocusing as national champions, selling off or reducing marginal overseas businesses where they didn't have scale." This provides an opportunity for a lender like Citigroup to swoop in to help those relatively mid-sized enterprises.

The bank plans to expand its capacity by hiring new bankers. EMEA commercial banking has 15 offices, most of which are concentrated in Europe. The company wants to add at least 10 to 20 employees for each of these outlets.

Due to the SARS-CoV-2 coronavirus outbreak, all of the "Big Four" U.S. banks -- including Citigroup -- have dramatically increased their loan-loss provisioning in anticipation of widespread defaults. With the numerous closures and stay-in-place measures engendered by the coronavirus, it is feared that many businesses and other lenders will not have the means to keep paying back their loans.

On Tuesday, Citigroup's stock fell by just over 2.8%. This performance was slightly worse than the declines suffered on the day by the major market indexes.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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