SATURDAY, FEBRUARY 20, 2016
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MARKET Citigroup plans to exit from Brazil, Argentina retail-banking business that discouraged investment. The country has been unable to tap international bond markets because of a feud with creditors left over from the nation’s 2001 default. Argentina sued Citigroup’s local unit last year after it reached an accord with a hedge fund allowing the bank to make two bond payments that the government said were illegal. In March, the firm said it would quit the custody business in the country after the government threatened to revoke its operating licence.
Chief Executive Officer Michael Corbat has been scaling back Citigroup’s retail footprint to simplify the company, cut costs and boost returns. He announced plans in October 2014 to drop consumer banking in 11 markets, including Peru, Costa Rica and four others in Central
SCALING BACK PRESENCE: The decision to leave Argentina and Brazil retail banking is one of the most sweeping since consumer-banking chief Stephen Bird took over in June. — Bloomberg file picture
and South America.
NEW YORK: Citigroup plans to exit retail banking in Argentina and Brazil, where the company has maintained operations for more than 100 years, a person familiar with the matter said. The departures will probably be announced in coming weeks, according to the person, who asked not to be identified discussing
decisions that haven’t been made public. Liz Fogarty, a spokeswoman for the New York-based bank, declined to comment on the plans. Chief Executive Officer Michael Corbat has been scaling back Citigroup’s retail footprint to simplify the company, cut costs and boost returns. He announced plans in October 2014 to drop consumer banking in 11 markets, including Peru, Costa Rica and four others in Central and South America.
PERFORMANCE
The bank won’t be exiting any lines of business in the institutional division as part of the new moves, according to a second person. When Citigroup agreed to sell its consumer- banking unit in Japan to Sumitomo Mitsui Banking Corp. in 2014, it still provided corporate and investment-banking services to clients. Citigroup, which gets more revenue from outside its home market than any of its US competi-
tors, operated branch networks in 24 countries as recently as September. The decision to leave Argentina and Brazil retail banking is one of the most sweeping since consumer-banking chief Stephen Bird took over in June from Manuel Medina-Mora, who retired. Jane Fraser, who had also been in the running for Medina-Mora’s job, runs the Latin America region from Miami.
Century-old unit The Argentina unit opened in 1914 and was the bank’s first non-US branch, according to Citigroup’s website. It has more than 2,700 employees in the country, 71 branches and 44.6 billion pesos ($3 billion) in assets, for the No. 12 ranking in the country, data from the nation’s banking association show. Argentina’s economy has been struggling after years of currency controls and policies
Creditor deals Since President Mauricio Macri took over the presidency in December, he’s lifted currency controls and scrapped export taxes in a bid to attract more investment. While the country remains isolated from international capital markets, the government has reached deals with some holdout creditors left over from the 2001 default and is negotiating with others in a bid to resolve the decade-long dispute. Citigroup had about 6,000 employees in Brazil as of 2014, a company executive said at the time. It operates 71 branches in Brazil, where it began banking in 1915, according to the website. Citigroup is the 10th largest commercial bank in the country, with 80.6 billion reais ($20 billion) in assets, according to central bank data. Foreign lenders including London-based Barclays and Frankfurt’s Deutsche Bank have been pulling back from the South American nation as it faces what’s predicted to be the worst recession in more than a century. — Bloomberg News
O W N E R - O P E R AT O R S S U RV E Y
‘Domestic franchisees of McDonald’s are pessimistic on turnaround efforts’
DIVIDEND RAISE: Allianz plans to increase its dividend by 6.6 per cent to 7.30 euros a share for 2015. That’s less than the Bloomberg Dividend Forecast of 7.40 euros. — Bloomberg News
Allianz fourth-quarter profit misses estimates MUNICH: Allianz missed analyst estimates for fourth-quarter profit on claims from natural catastrophes. Net income at Europe’s biggest insurer increased to 1.42 billion euros ($1.6 billion) in the quarter from 1.22 billion euros a year earlier, the Munich-based company said in a statement on Friday. That compares with the 1.56 billion-euro average of six estimates compiled by Bloomberg. “Allianz steadily delivers strong results in increasingly challenging operating conditions,” Chief Executive Officer Oliver Baete, 50, said in the statement. “Our business is healthy and well-diversified. This makes us confident that we will continue to deliver strong earnings.” Insurers in Europe are grappling with stricter regulatory capital requirements, low interest rates that hurt their investment income and subdued prices in some of their markets. Still, Allianz wants to achieve annual earnings per share growth of five per cent on average from 2016 to 2018. It is also targeting a return on equity of 13 per cent, adjusted to exclude unrealised capital gains on bonds and other items, by 2018. Allianz plans to increase its dividend by 6.6 per cent to 7.30 euros a share for 2015. That’s less than the Bloomberg Dividend Forecast of 7.40 euros. Some analysts had expected Allianz to announce a share buyback on top of the dividend to help it reach its return on equity and earnings per share targets. The company hasn’t discussed
either of those strategies, Chief Financial Officer Dieter Wemmer said in an interview with Bloomberg TV. “We want to deliver 15 per cent EPS growth over three years,” he said. “There might be opportunities in the market, there might be excess capital to be given back to shareholders.” The insurer’s asset management unit, which comprises Pacific Investment Management Co. and Allianz Global Investors, has also seen upheaval after the departure of Bill Gross from Pimco in September 2014. Group third-party net outflows fell to eight billion euros in the fourth quarter compared with outflows of 141 billion euros a year earlier. Outflows at Pimco dropped by almost half last year while the Global Investors unit saw record inflows. Allianz’s full-year operating profit rose 3.2 per cent to 10.7 billion euros. That compares to a target of 10 billion euros to 10.8 billion euros. For 2016, the company aims for 10 billion euros to 11 billion euros. Fourth-quarter operating profit was impacted by claims from European storms and floods, the company said on Friday. The property and casualty insurance unit’s spending on claims and other costs as a percentage of premiums, known as the combined ratio, improved to 96.2 per cent from 96.5 per cent, missing the average analyst estimate of 94.4 per cent. A ratio below 100 per cent means an insurer is making a profit from underwriting. — Bloomberg News
CHICAGO: McDonald’s franchisees remained pessimistic about the company’s turnaround efforts during the much-hyped rollout of all-day breakfast, according to an internal survey. Only about 14 per cent of McDonald’s domestic franchisees think the chain’s comeback plan is working, according to results from a survey of owner-operators obtained by Bloomberg News. And just 35 per cent of franchisees are confident in McDonald’s longterm future success, a drop from 46 per cent in the prior year. The survey, which the company conducts annually, was completed in October and November. McDonald’s posted US samestore sales growth of 5.7 per cent for the fourth quarter, the best performance in almost four years. The company cited its shift to all-day breakfast, as well as mild winter weather, for helping fuel the gain. In October, the company
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READY TO SERVE: McDonald’s posted US same-store sales growth
also reported positive sales in the US, lifted by a popular $2.50 meal deal. The stock jumped 8.1 per cent that day, the biggest increase in seven years. Chief Executive Officer Steve Easterbrook, who took over in March of last year, has said the company is committed to its turnaround plan, which includes
“running great restaurants, driving operating growth, creating brand excitement and enhancing financial value.” “While we are pleased with the recent positive momentum in the US, it will take at least six more months of positive comparable sales and guest count
growth to progress through the sustained and prolonged growth phases of our turnaround,” he said in January. Lisa McComb, a spokeswoman for the Oak Brook, Illinois- based company, said the survey doesn’t reflect the more recent progress the company has made. “These results are hardly surprising given the survey was conducted before McDonald’s ended the year with momentum,” she said. “By refreshing old favorites, like our Egg McMuffin, introducing all-day breakfast and making other changes, we are beginning 2016 in a better place than where we were 12 months ago.” McDonald’s ties with its franchisees are critical, especially in the US Of the company’s 14,000 domestic restaurants, about 90 per cent are independently owned. More than 3,000 domestic franchisees pay royalties and rent to the company. — Bloomberg News