Update: In March 2015, Indiana financial services company Springleaf entered into an agreement to acquire Baltimore-based personal lender OneMain Financial from Citigroup for $4.25 billion.
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Citigroup Inc. is one step closer to getting out of its U.S. subprime-lending unit.
The unit, OneMain Financial, on Wednesday filed initial paperwork required to split off as a public company. OneMain is a major player in subprime lending and how it performs is a bellwether for the rest of the industry.
Wednesday’s filing provides a window into OneMain, whose results Citigroup (C) hasn’t publicly parsed out before. Citigroup’s subprime unit suffered major losses in the financial crisis, but the filing shows it has been profitable since at least 2012: earning $407 million in net income in 2012, and $536 million in 2013. Citigroup earned $7.54 billion and $13.67 billion in those years, respectively.
OneMain noted the increased regulatory scrutiny affecting its industry. For example, it pointed out that the Consumer Financial Protection Bureau is cracking down on debt-collection practices. OneMain sells its troubled loans to agencies that hope to collect payment on them.
The filing also disclosed that independent auditors in 2011 and 2012 expressed reservations about the bank’s management of reserves it sets aside for potential losses. In those years, independent auditors found “material weakness,” including data input errors, incorrect forecasting and calculation errors related to loan-loss reserves. In 2013, auditors determined that the company had made progress on correcting the errors.
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