Citi Targets Expands Operations in China & Russia

June 23rd, 2011 by Trefis Team
+6.93%
Upside
62.49
Market
66.82
Trefis
C: Citigroup logo
C
Citigroup

Citigroup (NYSE:C) announced its move into the consumer and retail banking sector in Russia last week reinforcing its focus on emerging markets. This move comes on the heels of the group’s investment banking joint venture in China that will allow it to offer underwriting and merger & acquisition (M&A) advisory services in the country. Citigroup’s competitors such as Goldman Sachs (NYSE:GS), Morgan Stanley (NYSE:MS), JPMorgan (NYSE:JPM), Deutsche Bank (NYSE:DB), UBS (NYSE:UBS) and Credit Suisse (NYSE:CS) already offer investment banking services through joint ventures in China.

We have a $56 price estimate for Citigroup, which implies a 45% premium over its current market price

Relevant Articles
  1. Rising Only Half the S&P’s Gain In 2023, Where Is Citigroup Stock Headed?
  2. What To Expect From Citigroup Stock In Q3?
  3. Citigroup Stock Is Trading Below Its Intrinsic Value
  4. Citigroup Stock Is Trading Below Its Intrinsic Value
  5. Citigroup Stock Has Growth Potential
  6. Is Citigroup Stock Fairly Priced?

Retail Expansion in Russia

Citigroup purchased retail assets worth $10.7 million from HSBC Holdings (NYSE:HBC) to expand its existing network of 55 retail offices and 350 ATMs in 11 Russian cities. [1] [2] The company’s CEO, Vikram Pandit, has been advising President Dmitry Medvedev in his efforts to make Moscow one of the leading financial hubs of the world. [3] This definitely helped play a role in Citigroup’s decision to boost its operations in the country – especially at a time when other international banks like Morgan Stanley and Barclays have divested or reduced their retail operations. [4]

We expect this consolidation in Russia to help Citibank establish its business in an under served market where only about 25% of the 142 million Russians have a bank account of any sort.

Citigroup is looking ot expand retail operations in Russia

Source: Wikipedia.org

Citigroup’s consumer banking division managed assets worth approximately $590 billion in 2010. Expansion in Asia is a key factor we considered in out forecast that the division’s assets will expand to cross $750 billion over the next 5 years.

Investment Banking JV in China

China is one of the largest growing markets for equity and debt underwriting services as well as M&A advisory services. Earlier this month, Citi announced that it was getting into a joint venture with Orient Securities to offer these services domestically within the country. [5] The company has already been offering these services through its Hong Kong office.

Investment banking operations contribute to less than 5% of our price estimate for Citigroup. Citi is also ramping up its retail operations in China and is expected to increase its branches here from the present 36 to 50 by the end of the year.

Click here for our full analysis of Citigroup.

Notes:
  1. HSBC Sells Part of Russian Retail Banking Unit to Citigroup, Bloomberg [↩]
  2. Citigroup Russia, Citigroup [↩]
  3. Wall Street Heads to Petersburg Lured by Medvedev $30 Billion Asset Sales, Bloomberg [↩]
  4. Gold rush into Russian retail banking sector comes to an end, RBTH [↩]
  5. Citigroup sets up China securities joint venture, AFP – Yahoo Finance [↩]