Citigroup is shedding its consumer finance unit, part of the company’s years-long commitment to unload non-core units and assets.
Citi said Tuesday that it was selling OneMain, provider of both secured and unsecured personal loans, to consumer loan originator Springleaf for $4.25 billion. The deal is expected to close in the third quarter.
“While [OneMain] didn’t fit our strategy, it serves customers who deserve and need credit,” Citi chief executive officer Michael Corbat said in a press release. “Today’s announcement is a significant milestone in the simplification of our company and we continue to focus on delivering the potential of our franchise for our clients and shareholders.”
OneMain has been part of Citi Holdings, which was created in 2009 to house assets that Citigroup determined were “not central to its core franchise.” Since then, Citi has sold more than 60 businesses and reduced assets in Citi Holdings by more than $700 billion. At the end of 2014, Citi Holdings’ assets represented roughly 5% of total Citi assets, down from a peak of more than 30%.
Citi executives are on pins and needles awaiting the results of the Federal Reserve’s latest stress test. Citi had its capital plan rejected last year, and the jobs of Citi’s CEO and its CFO could be on the line.
Citi plans to use a portion of the proceeds from the OneMain sale to retire certain funding that currently supports Citi Holdings, the company said. The sale, along with retirement of the related funding, are expected to result in a net addition to earnings before income taxes of roughly $1 billion.
A Reuters article Tuesday said that OneMain and Springleaf are the only two sizable national players in the growing subprime consumer lending industry. The combined company would have $15 billion in assets and nearly 2,000 branches.
OneMain filed for an initial public offering in October and had considered bids at that time, but the prices offered were insufficient.
Springleaf is majority owned by Fortress Investment Group LLC.
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