Buyers step up as Citi sells consumer assets

Citi is fielding expressions of interest for its credit card and consumer banking operations from banks and non-banks, including Ahmed Fahour’s Latitude Financial Group.

Latitude CEO Ahmed Fahour. Picture: Aaron Francis

Citi has received a wide range of expressions of interest in its Australian credit card and consumer banking businesses, with first and second-tier banks raising their hands as well as a sprinkling of non-bank players including Latitude Financial Group.

Latitude, a credit card and instalment payments company run by former Citi Australia and New Zealand chief executive Ahmed Fahour, will list on the Australian Securities Exchange next week.

While Latitude could acquire the credit card business, it would need a banking licence to operate the consumer banking unit.

Latitude declined to comment.

Despite the strong level of early interest in the assets, industry consultant and former head of Diners Club in Australia and New Zealand Grant Halverson predicted that second-tier and foreign banks would be the more serious players.

“Unsecured credit is not the flavour of the month,” Mr Halverson said.

Appearing before the House economics committee on Friday, NAB chief executive Ross McEwan was circumspect about the bank’s interest.

“I am going to disappoint the committee around this particular line of questioning, because I’m not going to actually speculate on what we do or others do; I think that’s inappropriate,” Mr McEwan said.

“Were a transaction such as that to become a reality, I think the Australian Competition & Consumer Commission, regulators and the government itself will give careful consideration to it, so I won’t be able to answer that question.”

Source: APRA

Citi has indicated its preference to sell the businesses in a single transaction, rather than go through the cumbersome process of separating credit cards from consumer banking.

Separation would take time and defer the likely completion date into next year.

While credit card businesses did it tough at the height of COVID-19, savings lifted. Citi’s parent company said on Thursday in its first quarter result that its global cards business had returned to growth.

The trend was repeated in Australia.

The parent announced at the same time it would exit its Australian credit card and consumer banking business as part of a global restructure under new chief executive Jane Fraser.

The move, which affects the group’s presence in 13 markets including Australia, follows a global review of its consumer operations under way since the beginning of the year.

The bank has already been fielding offers for its consumer banking arm.

A Citi statement said the sale of the Australian consumer business would enable it to concentrate on its investment banking unit, including capital markets and advisory, markets and securities services, commercial banking and treasury and trade finance.

“Citi’s consumer bank in Australia is an attractive and profitable business, employing highly skilled and dedicated team members,” Citi Australia chief executive Marc Luet said.

“Citi is committed to securing the best possible outcome for our employees and our customers.”

Mr Luet confirmed that Citi had received interest from several potential buyers of its Australian consumer business.

Any sale would be subject to regulatory approval.

The consumer bank has 1.8 million customers, offering a range of financial services products including transaction accounts, term deposits, credit and charge cards, wealth management solutions and mortgages.

It is the fifth largest card issuer in Australia with a market share of about 12 per cent.

ANZ Bank chief executive Shayne Elliott defended the credit card industry before the House economics committee.

“There’s an extraordinary range of providers out there of consumer credit products,” Mr Elliott said.

“Credit cards still have a very, very dominant position and they’re a great product when used appropriately.

“What we’re seeing, which is a good thing, is an alternative and so people are using debit cards, combined with buy now, pay later. But they’re not doing it instead of a credit card.”