Financial institutions looking to wind down assets not related to core banking functions — especially those with large consumer credit exposure — will continue to face challenges given ongoing volatility in the credit and equities markets, according to a Fitch Ratings report.
As a case in point, the rating agency highlighted the recent postponement of the Citigroup's sale of its OneMain consumer lending until market conditions improve and a better price can be realized.
The bank had been seeking a buyer for its consumer-lending unit under a strategy implemented in 2009 involving the shedding of non-core assets.
"We feel the dependence on the wholesale funding markets to finance an entire operation on a cost-effective basis will make free-standing finance companies considerably more challenging to operate than in the past," said Fitch analysts in the report. "While potential buyers remain wary of businesses that rely on loan securitization, we believe Citigroup will continue its exploration of separation opportunities once markets stabilize."