Citigroup offloads Diners Club

Citigroup’s chief executive moved on Monday to streamline the troubled financial services conglomerate by selling the Diners Club International credit card network to Discover for $165m.

The decision to sever the 27-year tie with Diners comes as Vikram Pandit and his lieutenants conduct a review that could lead to up to 25,000 job losses across global operations, say people close to the situation.

Diners, which handles $30bn in transactions a year, had given Citigroup the ability to compete with large credit card networks.

A sale was part of Mr Pandit’s efforts to divest marginal businesses and free up resources for core activities, executives said.

Ed Eger, head of international cards at Citigroup, said the decision was “consistent with Citi’s efforts to streamline its businesses to focus on what Citi does best”.

Citigroup executives say Mr Pandit wants to increase investments in areas such as the international consumer business, including credit cards; its wealth management unit and parts of its investment banking operations.

After huge losses in the credit crunch and being forced to raise $30bn from outside investors, Citigroup is under pressure to revive its share price.

Citigroup announced more than 4,000 job cuts this year but regional chiefs have been told to come up with suggestions for a second round.

They are expected to report back in weeks, with an announcement likely when Citigroup, which has 370,000 employees, reports first-quarter results on April 18 or soon afterwards.

Mr Pandit has not commented publicly on its strategy.

Citigroup said: “One of Citi’s key priorities is to drive cost and operational efficiencies in order to generate additional shareholder value. Vikram Pandit continues to work with senior leadership …to make Citi a leaner, nimbler company …”

Discover, which was spun off from Morgan Stanley last year, said the Diners acquisition would add $10m-$15m in annual pre-tax profits. The deal is expected to close within three months.

Founded in 1950, Diners was the first credit card network and focused on high-income, well-travelled consumers. However, in recent years, it has been dwarfed by larger credit card networks.

Business leaders in London have been told to reduce budgets rather than absolute headcount, with the targeted reductions varying by department. In some cases, layers of middle management are likely to be removed.

The consultation is thought to be most advanced in fixed income and began in equities and investment banking last week, where cuts of less than 10 per cent are expected.