An agreement has been reached on the German consumer banking arm of Citibank, with the operation being sold to Credit Mutuel of France.
The deal will see the cash reserves of Citibank around GBP3.9 billion richer and help the bank on its way to the larger target of selling around GBP200 billion worth of assets over the coming three years. The bank was badly hit by the sub prime mortgage collapse in the United States and is now working to realign the business.
As well as selling assets Citibank is also looking to shed over 16,000 jobs in the same three year period. This is again to re-structure the organisation and will go hand in hand with the selling of businesses such as their German banking operation.
Citibank has come to an agreement with the US Securities and Exchange Commission (SEC) to buy back several billion dollars worth of auction rate securities, the risks of which had been misrepresented.
The SEC had recently looked into the situation and decided Citibank had mismarketed and sold the securities as being less risky than they were. Citigroup had promoted them as being as safe as similar cash based products though this is not the case.
Although Citibank are buying the securities back it is something they could really do without since they have been hit very hard by the collapse of the sub-prime lending market. Financing the buyback will damage the bank further as they will have to reimburse any customers who sold for a loss, on top of paying fines worth USD100 million.
The new management team at Northern Rock is looking into whether they can take legal action against the previous board that led the bank into such difficulties last year.
At the moment the matter is in the hands of lawyers acting on behalf of Northern Rock who are in the process of looking into the situation to determine what can be done. Only after their analysis is complete will there be any decision made on pursuing the matter through the courts.
Elsewhere at Northern Rock the bank is aiming to increase the debt collection part of its business by well over 100 percent as they plan for the financial difficulties that may face their customers in the future. There are currently around 170 people in this particular department though that number will be closer to 450 after the extra staff have been brought on board.
