NEW YORK (TheStreet) -- Shares of Citigroup Inc. (C - Get Report) are higher by 0.71% to $53.87 in pre-market trading on Tuesday morning, after the financial institution announced that it has agreed to sell its lending unit OneMain Financial Holdings Inc. to Springleaf Holdings (LEAF - Get Report) for a purchase price of $4.25 billion.
Citi expects that the deal will close in the third quarter of fiscal 2015.
Shares of the personal finance company Springleaf Holdings are jumping by 21.45% to $46.20 in pre-market trading this morning following the deal.
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"OneMain is a great business with talented people, who will now become part of a leading personal finance company. While this business didn't fit our strategy, it serves customers who deserve and need credit. Today's announcement is a significant milestone in the simplification of our company and we continue to focus on delivering the potential of our franchise for our clients and shareholders," Citi CEO Michael Corbat said in a statement.
The combining of Springleaf and OneMain Financial will create the biggest subprime lender in the U.S., the Wall Street Journal said.
Citi said the sale, along with retirement of the related funding, is expected to result in a net addition to earnings before income taxes of approximately $1 billion.
Separately, TheStreet Ratings team rates CITIGROUP INC as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:
"We rate CITIGROUP INC (C) a HOLD. The primary factors that have impacted our rating are mixed some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its good cash flow from operations and increase in stock price during the past year. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and poor profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Net operating cash flow has significantly increased by 1537.12% to $27,291.00 million when compared to the same quarter last year. In addition, CITIGROUP INC has also vastly surpassed the industry average cash flow growth rate of 303.10%.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 4.6%. Since the same quarter one year prior, revenues slightly dropped by 2.5%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Commercial Banks industry and the overall market on the basis of return on equity, CITIGROUP INC underperformed against that of the industry average and is significantly less than that of the S&P 500.
- The gross profit margin for CITIGROUP INC is rather low; currently it is at 22.63%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 1.66% significantly trails the industry average.
- You can view the full analysis from the report here: C Ratings Report