Fitch: Citi's Sale of OneMain Favorable; No Impact to Ratings
OneMain's sale price of \$4.25 billion results in an estimated pretax gain of approximately \$1 billion for Citi, and is in line with the continued wind-down of noncore assets housed in Citi Holdings. Citi's consumer focus is on affluent customers in urban areas, while OneMain offers unsecured consumer finance loans serving the underbanked population in the US.
In November 2014, OneMain paid a \$1.5 billion dividend to Citi, as part of a dividend recapitalization. This was funded by \$1.5 billion of intercompany-related debt from Citi. Some of the proceeds of the sale will be used to retire some of the related funding.
Citi remains committed to its 2015 return on assets target of at least 90 bps in 2015. The associated gain on sale will aid Citi in possibly meeting its earnings targets for 2015, though the targets will likely remain very challenging in light of the interest rate environment, elevated and uncertain litigation-related charges, and uneven global economic growth. Fitch also notes that while Citi Holdings became profitable in 2014 (excluding the Department of Justice fine), the absence of OneMain's earnings may make that task more difficult for Citi Holdings after the transaction closes. OneMain's assets comprise around 10% of Citi Holdings' total assets.
The deal is expected to close in third-quarter 2015, subject to regulatory approvals.
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