Citi to exit Brazil card venture as lack of scale bites -sources

lunes 23 de noviembre de 2015 10:03 GYT

By Tatiana Bautzer and Guillermo Parra-Bernal

SAO PAULO Nov 23 (Reuters) - Citigroup Inc has put its stake in a Brazilian credit card processing joint venture with Elavon Inc up for sale, two sources with direct knowledge of the plan said, after a disagreement over additional funds for the loss-making unit.

Relations between Elavon and Citigroup, partners for five years, have soured after Brazil's central bank said the joint venture needed more cash and the U.S. bank declined to come up any additional funds, said the sources, who declined to be named because the talks were confidential.

The joint venture, known as Elavon do Brasil, has failed to gain traction in a burgeoning payment processing market dominated by Cielo SA and Redecard, a unit of Itaú Unibanco Holding SA. They have a combined 95 percent of the market while Elavon has just 1 percent.

One source said the Citi-Elavon venture needs about 200 million reais ($52 million) in new capital. But with Brazil mired in recession, Citi does not want to deploy more money in the country and is unwilling to reallocate capital from its other operations there, the source said.

Over the past three years, Citigroup has tempered its ambitions in Brazil. Helio Magalhães, who became Citigroup's Brazil chief executive officer in 2012, reversed his predecessor's strategy of vying for market share with larger rivals, to focus on wealthy customers and corporate banking.

The value of Citigroup's 49.9 percent stake has yet to be determined, one source said.

The joint venture had negative equity of 195 million reais as of June, according to Citigroup's Brazil financial statements, meaning the bank could lose money if it tried to sell the stake.

In a statement to Reuters, Citigroup said the joint venture remained "an investment aligned with our strategy of offering a complete product platform to our corporate clients."   Continuación...