UK banking group Barclays has its eyes set on
taking advantage of Citi’s weaknesses in its rumoured
interest to buy Citi’s troubled Egg credit card network,
said US consultancy firm Aite Group.
The Financial Times has revealed only
a handful of financial institutions have made it through to the
second round of bidding for the Citigroup-owned Egg credit
card network, with Barclays said to be among them.
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“Barclays’ rumoured interest in buying Citi’s
Egg credit card network is not a surprise,” said Gwenn Bézard, Aite
Group’s research director.
“With a number of ex-Citi executives now
running Barclays, the firm has had its eyes set on how to take
advantage of Citi’s weaknesses to further Barclays’s clout in
various lines of business.”
Citi is keen to sell off Egg as part of its
$800 billion (£499.7 billion) strategy to reduce non-core assets
from its Citi Holdings portfolio in an “economically rational
manner” to raise capital after its bail-out by the US
government.
However the FT quotes
insiders from the auction who estimate that the winning bidder may
pay just 60 percent of the amount Citigroup paid in 2007 when
it acquired Egg.
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By GlobalDataCiti paid £575 million ($920.74 million),
but with so few parties interested in the purchase, rumoured to be
private equity company Blackstone, Barclays and at least one other
unnamed bank, the deal may go for as little as £350 million –
incurring Citi a loss of £225 million.
All parties involved refused to comment, but
Barclays insiders revealed that the bank is pursuing a
“bargain price” for the loss-making credit card network, reported
Mark Kleinman from Sky News.
Barclays is no stranger to bargain
acquisitions. Last year, it bought UK based savings and investment
company Standard Life Bank for a fraction of its net asset
value.
An acquisition of Egg would further improve
its business efficiency and customer service quality, while cutting
costs as the bank could outsource Egg’s Derby-based employees.
“For Barclays, sitting on an existing large
footprint in credit card issuing in the UK, Egg represents a
logical target for consolidating its presence,” Bézard said.
A deal between the two banking giants would
not be the first. Barclays has already bought Citi’s Italy and
Portugal credit card businesses.
With just under two million customers,
Egg still has iconic status in the UK, despite becoming a
predominately loss-making business since its launch.
It was introduced to the market by insurance
company Prudential in 1998 became one of the first online banks in
the UK, with a leading credit card business during the internet
boom in the 1990s.
Citi had to be bailed out by the US government
at the onset of the financial crisis and is halfway through the
sell-off and relaxation of its non-core valuables.
