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BANK

French bank buys German Citibank business

Regional French bank Credit Mutuel said on Friday that it will pay €4.9 billion ($7.7 billion) to buy the German business of US banking giant Citigroup, hard hit by the global financial crisis.

French bank buys German Citibank business
Photo:DPA

Credit Mutuel, which outmanoeuvred leading German bank Deutsche Bank with its bid and will pay cash, said: “With this major acquisition, Credit Mutuel…now takes on a significant position in Europe, thus opening up a second domestic market.”

In Frankfurt, Citigroup said that the sale of its business in Germany, operating under the Citibank name, would yield a post-tax capital gain of about $4 billion.

Citigroup has been hard hit by repercussions of the US subprime mortgage crisis and has said it wanted to dispose of assets worth about $400 billion and considered non-strategic to activities in the next two to three years.

These asset sales would concern investment and retail banking, it said.

Credit Mutuel operates mainly in two French regions, Brittany in the northwest and Alsace in the northeast, although in the last 10 years it has expanded within the country and in Belgium, Luxembourg and Switzerland. It was founded by a mayor in the mid-19th century to help poor farmers and craftsmen.

The Citibank business being acquired has 3.3 million customers, 340 branches and 6,700 employees.

Credit Mutuel said: “With seven percent of the market, it is an essential player in consumer credit in Germany.”

Credit Mutuel said it would pay €4.9 billion in cash when the deal was concluded, probably at the end of this year.

ECONOMY

Swedish economy to grind to a halt as interest rates kick in

Sweden faces an economic slump next year that will see economic growth grind to a complete stop, Sweden's official government economics forecaster, has warned.

Swedish economy to grind to a halt as interest rates kick in

Sweden’s National Institute of Economic Research, which is tasked with tracking the business cycle for the Swedish government, warned in its quarterly forecast on Wednesday that greater than expected energy prices, interest rate rises, and stubborn inflation rates, Sweden was facing a significant downturn. 

The institute has shaved 1.6 percentage points off its forecast for growth in 2023, leaving the economy at a standstill, contracting -0.1 percent over the year. 

The institute now expects unemployment of 7.7 percent in 2023, up from a forecast of 7.5 percent given when in its last forecast in June.

“We can see that households are already starting to reign in their consumption,” said Ylva Hedén Westerdahl, the institute’s head of forecasting, saying this was happening “a little earlier than we had thought”. 

“We thought this would have happened when electricity bills went up, and interest rates went up a little more,” she continued. 

The bank expects household consumption to contract in 2023, something that she said was “quite unusual” and had not happened since Sweden’s 1990s economic crisis, apart from in the immediate aftermath of the Covid-19 pandemic. 

This was partly down to a five percent reduction in real salaries in Sweden in 2022, taking into account inflation, which the institute expects to be followed by a further two percent fall in real salaries in 2023. 

If the incoming Moderate-led government goes ahead with plans to reimburse consumers for high power prices, however, this would counterbalance the impact of inflation, leaving Swedish households’ purchasing power unchanged. 

The institute said it expected inflation to average 7.7 percent this year and 4.6 percent in 2023, both higher than it had forecast earlier.

Sweden’s Riksbank central bank this month hike its key interest rate by a full percentage point, after inflation hit 9 percent in August, the biggest single hike since the 1990s. 

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