Citigroup Incurs $800 Million Loss By Selling Turkey's Akbank

Citigroup is disposing of small investments to concentrate on domestic operations

The Citigroup Inc. (C) incurs a loss of $800 million, on the purchase price, by selling the second-largest Turkish bank by market value, Akbank TAS.

The New York-based bank said today that it has disposed of its outstanding 9.9% stakes in the Turkish bank for $1.15 billion ($2.89 per share). The bank could have saved $380 million, amount of loss it incurred on the remaining 9.9% stakes, if it would have waited for expiring date of the agreement, which included a clause to sell the equivalent holding for the same price, with holding company of Akbank, Haci Omer Sabanci Holding A.S.

Citigroup acquired 20% stakes of bank in 2007 for $3.1 billion and sold the stakes in two separate transactions. It had already incurred a loss of $420 million by selling 11% of its holdings at Akbank. The combined loss for both the disposals accumulated to $800.

According to Citigroup CEO Michael Corbat, the company is disposing of small investments to concentrate on domestic operations. Turkish analysts have said that early departure of Citigroup from Akband shows that the underperforming stock market of Turkey has further worsen.

Citigroup said in an email statement to Bloomberg, “The proposed sale is consistent with Citi’s strategy to simplify and strengthen the bank.”

The investors at the Wall Street appreciated the news, as the stocks of Citigroup were slightly up in pre-market trading today.

Mr. Corbat intends to shrink assets of the U.S. third-largest bank by assets, as it announced to sell stakes in OneMain Financial, Inc. to Springleaf Holding Inc. in a $4.25 million cash deal.

However, the American lender is committed to offer its services to commercial and corporate clients in Turkey, as it has around 500 employees in the country.

Although, shares of the Turkish Akbank surged roughly 50% after Citigroup Plc acquired its stakes in 2007, the value of its domestic currency fell significantly against dollar, which is another major reason for selling the assets. The lira has depreciated around 10% in 2015, as the President Erdogan’s government official face heavy criticism. 

Citi is the global leading bank, owning up around 200 million customer accounts approximately. The group has business spread around over more than 160 countries. It provides corporations, consumers, governments as well as institutions a broad range of financial services and products, which also includes consumer banking, crediting, corporate banking, investment banking, transaction services, securities brokerage and wealth management.