Citigroup sold its German retail banking business to Crédit Mutuel, France’s third-largest retail bank, for €4.9 billion (£3.9 billion) yesterday.

The deal, part of a restructuring programme at Citigroup, is expected to be finalised in the fourth quarter. Deutsche Bank had also bid for the business, which includes Düsseldorf-based Citi-bank Privatkunden and some affiliates.

The sale is part of plans by Vikram Pandit, Citigroup’s chief executive, to return the banking giant to profitability after two quarters of losses. Mr Pandit has said that he would sell up to $500 billion (£252 billion) of assets as part of the programme.

It is Crédit Mutuel’s biggest purchase, and will help its international expansion by giving a 7 per cent share in the German consumer banking market. It has already expanded into Switzerland and Luxembourg. Standard & Poor’s, the ratings agency, said it might downgrade Crédit Mutuel’s high investment-grade ratings as the deal was a move from it’s usual domestic focus.

Citigroup said that the sale would result in a gain of about $4 billion after tax and boost its Tier 1 capital ratio – a key measure of its financial strength – by 60 basis points. Its balance sheet has been hit by $40 billion in writedowns since the start of the credit crunch and the bank is expected to unveil more losses when it releases its second-quarter results shortly. It has raised $50 billion of fresh funds since the crunch.

Separately, pressure was growing on the management at Crédit Agricole as a result of the bank’s recent underperformance. It was reported yesterday that Georges Pauget, the chief executive of Crédit Agricole, and René Carron, its chairman, could threaten to resign at a board meeting next week as they come under pressure over losses tied to the credit crunch.

The board of the bank, which recently completed a €5.9 billion discounted rights issue, will meet on Tuesday.

Crédit Agricole revealed a €1.2 billion writedown and a 66 per cent decline in its first-quarter profits in May.

Fortis confirmed last night that Jean-Paul Votron had resigned as chief executive. He steps down with immediate effect after four years “by mutual agreement in the interest of the group”. The bank said following a board meeting in Brussels that Herman Verwilst, currently Mr Votron’s deputy, would replace him while a successor is recruited. His exit, which had been expected, comes weeks after the bank infuriated investors by raising €8.3 billion to prop up a balance sheet stretched by last year’s acquisition of ABN Amro.

In the UK, Lloyds TSB, which had considered an assault on the German market, is believed to have abandoned its pursuit of two potential acquisitions, Deutsche Postbank or Dresdner Bank.

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive