HSBC is positioned to acquire Citigroup’s (NYSE: C) China consumer wealth management operations, a deal that will significantly bolster the London-based bank’s presence in Asia. The transaction, which is expected to be announced next month, will see HSBC take control of a business that manages between $3 billion and $4 billion in assets, according to two sources familiar with the matter.
The acquisition is part of Citigroup’s broader strategy to exit consumer banking outside its home market. The U.S. bank had previously announced in 2021 that it would scale back its overseas retail banking business and wind down its consumer banking operations in China. The retail-wealth segment in China, catering to customers with assets between $100,000 and $1 million, was part of this planned exit. InvestingPro data reveals that Citigroup has been struggling with a declining trend in earnings per share and is quickly burning through cash, which may have contributed to this decision.
The financial details of the transaction are yet to be disclosed. It’s known that the deal will affect about 400 employees in China, who are expected to be absorbed by HSBC. The London-based bank will also assume control over “a few hundred” of Citigroup’s China-based staff as part of the agreement.
This acquisition aligns with HSBC’s aggressive strategy to expand its Asian wealth business. Two years back, the bank pledged to invest more than $3.5 billion over the next five years in this area. Since then, HSBC has been on a hiring spree, including recruiting 1,400 wealth managers in mainland China for its branchless venture known as Pinnacle. HSBC’s commitment to growth is reflected in the InvestingPro data that shows an accelerating revenue growth for the bank, along with a consistent increase in earnings per share.
Earlier this month, Citigroup stated it would simplify its international structure by eliminating some regional jobs as Chief Executive Jane Fraser undertakes a restructuring of its executive ranks and removes overlapping roles. Both HSBC and Citigroup declined to comment on the imminent deal. As per InvestingPro tips, HSBC has been a prominent player in the Banks industry and has raised its dividend for 3 consecutive years, offering a promising investment opportunity for shareholders.