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Citi closes Loan Brand

CitiGroup, which recently announced a $3bn loss in the first quarter of the year, has announced that it will shut down it's CitiFinancial loans operation and it's Future Mortgages brand.

The sub-prime lending departments provide employment for over 500 people in the UK across a network of 50 high street branches and a number of regional processing centres.

The provision of loans to sub-prime applicants has been a particularly difficult sector recently, with wholesale funding providers shying away from the market due to the higher risks associated with it. The applicants who only qualify for sub-prime products typically have a history of adverse credit and usually have a number of existing debts.

Unlike several months ago, when lenders actively sought out this profile of borrower, who were usually faced with higher interest charges and other fees and hence generated higher profits for lenders, many loan providers are unable to find deals that are suitable for them. The loans market is still very risk averse and although headline interest rates seem quite reasonable still, many applicants are being rejected. A cheap loan advertised by a particular loan company may in fact only be available to 50% or fewer of the people who apply for it.

Citigroup also lends money through it's other Citi and Egg brands and insists that loans and mortgages still a fundamental part of it's strategy. The Citi website today still carries promotions for personal loans although it fails to indicate the typical interest rate associated with it's products.

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