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* Popular in talks with Citi over Spanish retail unit
* Deal could include 45 branches, 300 staff - sources
* Barclays also weighing future of Spanish unit - report
* Foreign banks face tough competition with local lenders (Adds more details on Citi sale, BBVA's Portuguese review,background on Spanish, Irish markets)
By Sarah White and Jesús Aguado
MADRID, April 4 (Reuters) - Banco Popular said onFriday it was in talks to buy Citigroup's retail bankingand credit card business in Spain, where other foreign playersstruggling to compete with local banks after a financial crisishave considered exits.
Popular, Spain's fifth-biggest bank by market value, did notprovide any financial details of its discussions with the U.S.lender. The deal would include 45 retail bank offices and atleast 300 staff, two sources familiar with the talks said.
Banks worldwide have been pulling out of strugglingbusinesses, or operations no longer central to their strategy,as they cut costs and bulk up capital to meet regulator demands.
Spain has been particularly tough for international lendersin recent years as an economic downturn spurred a wave of localbank mergers, cementing the dominance of domestic firms.
Even local players have been shutting or trying to sellbranches, after a 2008 property crash halted their expansion andleft some short of capital and in need of bailouts.
Popular was not rescued by the state, but like peers it isstill recovering from the crisis that landed it with soured realestate loans and housing. It swung back to profit in 2013,though its net income from loans fell from a year earlier.
In a market increasingly centred on fewer than 10 topplayers - after most of the 45 Spanish savings banks thatexisted in 2010 were merged - the country's banks have beentrying to increase their share, buying assets from foreignrivals leaving or nationalised lenders being auctioned off.
A Popular acquisition of Citi's business would come withabout 100,000 retail clients and about 1.1 million credit cardsin issue, one of the sources familiar with the deal said, addingthat the talks could conclude in two or three months.
A Citigroup spokesman confirmed it was in talks withPopular, but declined further comment.
Last year peer Sabadell bought the private andretail banking business of Britain's Lloyds in Spain.
PULLING BACK
Foreign banks have also pulled out of other European marketsin recent years, including in Ireland, which also suffered adevastating property crash. Dutch lender Rabobank called time onits Irish unit last year and Lloyds left Ireland four years ago.
Citigroup, meanwhile, one of the most international of U.S.banks, has already withdrawn from consumer banking in countriessuch as Turkey, Uruguay and Romania in recent years.
Britain's Barclays, which cut jobs and offices inEurope last year, has also been considering a potential sale ofits Spanish retail banking business, newspapers El Pais andExpansion reported on Friday.
They said the bank has been contacting potential adviserssuch as Goldman Sachs, Bank of America Merrill Lynch and Morgan Stanley to analyse how much a sale ofthe business, or some of its assets, would fetch.
Barclays, which has been restructuring its Spanish businessto focus more on wealthy clients, declined to comment, as didthe investment banks. It shut at least 161 branches in Spainlast year as well as offices in Italy, Portugal and France.
Several sources at the bank and in the market played downthe chances Barclays would sell its entire Spanish business,however, adding it had long been rumoured but would make nosense now unless it could fetch an attractive price.
"Barclays has had regular contacts in recent years withbanks to review its options in Spain," one banking source said,while another said there was nothing imminent in the works.
Any banks selling out, including Citigroup, are likely tokeep a team of investment bankers in Spain, where stock marketlistings and mergers and acquisitions are picking up again asthe economy emerges from recession.
Spanish banks have also been reviewing their own operationsabroad. Santander is analysing how it allocates capitalto its businesses, and Chief Executive Javier Marin has said itcould restructure or exit underperforming units.
It is still looking to expand in some areas, however, and isamong European banks circling German corporate bank IKB, sources said.
BBVA, meanwhile, has hired Nomura to analyse apotential sale of its Portuguese division, which reported a losslast year, a source familiar with the matter said. BBVA andNomura declined to comment. (Additional reporting by Robert Hetz and Tracy Rucinski inMadrid and Carmel Crimmins in Dublin; Editing by Julien Toyerand Pravin Char)
