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Tuesday, March 03, 2015

Fitch: Citi's Sale of OneMain Favorable; No Impact to Ratings

Breakingviews TV: Citi haul Selling its most profitable business, subprime lender OneMain, for $4.25 bln strangely enough delivers Citigroup many benefits. Breakingviews editors explain. The following statement was released by the rating agency) CHICAGO, March 03 (Fitch) Citigroup's announced sale of OneMain Financial Holdings, Inc. (OneMain) to Springleaf Finance Corporation (Springleaf) is viewed favorably, says Fitch Ratings. The sale was widely expected as Citi first identified OneMain as a noncore business in 2009. There is no impact to Citi's ratings. OneMain's sale price of $4.25 billion results in an estimated pretax gain of approximately $1 billion for Citi, and is in line with the continued wind-down of noncore assets housed in Citi Holdings. Citi's consumer focus is on affluent customers in urban areas, while OneMain offers unsecured consumer finance loans serving the underbanked population in the US. In November 2014, OneMain paid a $1.5 billion dividend to Citi, as part of a dividend recapitalization. This was funded by $1.5 billion of intercompany-related debt from Citi. Some of the proceeds of the sale will be used to retire some of the related funding. Citi remains committed to its 2015 return on assets target of at least 90 bps in 2015. The associated gain on sale will aid Citi in possibly meeting its earnings targets for 2015, though the targets will likely remain very challenging in light of the interest rate environment, elevated and uncertain litigation-related charges, and uneven global economic growth. Fitch also notes that while Citi Holdings became profitable in 2014 (excluding the Department of Justice fine), the absence of OneMain's earnings may make that task more difficult for Citi Holdings after the transaction closes. OneMain's assets comprise around 10% of Citi Holdings' total assets. The deal is expected to close in third-quarter 2015, subject to regulatory approvals. Refer to the press release, "Fitch Places Springleaf's 'B' Rating on Watch Negative Following Proposed OneMain Acquisition," for a discussion of the effects of this proposed transaction on Springleaf's credit profile. Contacts: Julie Solar Senior Director Financial Institutions +1 312 368-5472 70 West Madison Street Chicago, IL Matthew Noll, CFA Senior Director Financial Institutions - Fitch Wire +1 212 908-0652 33 Whitehall Street New York, NY Media Relations: Elizabeth Fogerty, New York, Tel: +1 (212) 908 0526, Email: elizabeth.fogerty@fitchratings.com. The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings. ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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