Citi Sells Diners Club Credit Card Businesses

Major U.S. bank Citigroup Inc. recently ended its ties with Diners Club North America, a long running credit card business and is actually the first charge card in the works. Citigroup, a bank which is 34% government owned, and Diners Club have been in business for 28 years.

Citigroup is selling its Diners Club business to Bank of Montreal for an undisclosed amount. The sale will bring down the total assets of Citigroup by a billion dollars, according to a statement released by a representative from the company. The total loss would account for 0.05% of the entire global assets of the company which is around $1.89 trillion. The company also stated that the sale will not have a material impact on the capital ratios or the net income of Citigroup.

Vikram Pandit, the Chief Executive Office of Citigroup has been selling off what he calls “non-core” businesses to the company’s corporate lending, retail banking, investment banking and main trading operations in Asia, Latin America and North America. Among 21 business, the Diners Club North America was just one of those that the company moved to its Citi Holdings Division and was tagged to be sold or winded down.

The company stated that, “The sale of this business is consistent with Citi’s strategy to optimize the assets and businesses within Citi Holdings while working to generate long-term profitability and growth”.

Spokesman for the company, Alex Samuelson stated that, once the sale is closed on early next year, Citigroup Inc. will be exiting from all of its businesses related to Diners club. It should be noted that the biggest portion of Diners Club International was sold by the company to Discover Financial Services last April of 2008 for a sum of $165 million.

In a separate statement, Bank of Montreal stated that its acquisition of Diners Club North America will bring corporate credit card line of business to more than twice its current size. This will add $7.8 billion to the total card transactions of the bank and $1 billion to its net receivables.

Edward Jones & Co. of St. Louis Missouri’s analyst Craig Fehr said “Bank of Montreal has a good domestic franchise within credit cards and that’s an area they can grow. I would view this deal more as symbolic of their strategy going forward to pursue the card business”.

With the deal in place, Bank of Montreal, based in Toronto, will have exclusive rights to issue Diners Club credit cards to professional and corporate customers in Canada and in the U.S.