Citi swings axe to restructure Italian business

Citigroup is looking to sell - or failing that, to close - its private banking business in Italy and is to reduce its presence in the country by about half.

The move, part of the US banking group's global restructuring programme, is expected to see the number of people employed in Italy fall from 1,000 to about 500 by the end of this year, with most of the job losses coming in its Italian consumer finance business. That unit, which has 65 branches round the country, is being closed.

Citigroup's scaling down in Italy represents a dramatic shift in policy for the bank, which expanded rapidly round the world in the past decade.

But it is consistent with its strategy of shrinking its balance sheet and divesting itself of non-core assets as it tries to revive its fortunes after suffering billions of dollars of losses during the global financial crisis.

Citigroup has held talks with Banco Santander of Spain, among others, about selling its Italian private business, which has assets of about €2bn ($2.8bn) under management and is considered too small to be competitive. If the bank cannot find a buyer, it is expected to close the unit.

Once the restructuring has been completed, Citigroup's business in Italy will be concentrated on corporate and investment banking and global transaction services.

Two years ago it sold its retail banking unit to Credem, an Italian bank. Citigroup has also sold its Milan headquarters, in a sale and leaseback deal.

Sergio Ascolani, Citigroup's head of banking in Italy, told the Financial Times: "It's absolutely rational, with current markets, to exit from businesses that are marginal and invest in areas where Citi is globally strong." He added: "We're not exiting Italy, just rationalising here."

Citigroup is one of the chief casualties of the global financial crisis and is under intense pressure to restructure and shrink after using hundreds of billions of US taxpayer dollars to prop itself up.

It is expected to finalise the sale of a 34% stake to the US government as part of its latest bail-out.

In January, Citigroup placed $650bn-worth of non-core assets and businesses into a separate division with a view to selling them or winding them down.

The new unit, called Citi Holdings, includes the bank's US consumer finance operations, about half of its credit card business and most of the toxic mortgage-backed securities that caused most of Citi's losses. On Friday, Citi created a special board committee to oversee Citi Holdings and monitor the disposal of its assets.