Citigroup‘s effort to sell a consumer-lending business has collapsed in recent days, as wobbly markets and a lackluster economy shut down hopes for a deal, a person with knowledge of the matter said.

Last year Citigroup began exclusive talks with a pair of private equity firms and Berkshire Hathaway, Warren E. Buffett‘s conglomerate, to sell OneMain, a lender that offers home equity and personal loans to risky borrowers. The talks coincided with the bank’s broader effort to shed noncore businesses in the aftermath of the financial crisis.

But Citi and its suitors all agreed to abandon the OneMain effort after the bidders, which included the private equity firms Centerbridge Capital Partners and Leucadia National, concluded that it would be difficult to finance the business. To do so, the firms would have had to bundle new loans and sell them as securities to investors. The securitization market for private loans has been scare since the crisis, however, as investors have balked at the risk attached to such products.

Still, Citi has not abandoned plans to sell OneMain, which remains profitable. The bank is likely to put the unit on the block again if the markets regain stability, said the person with knowledge of the matter, who spoke on condition of anonymity. For now, OneMain will remain in the bank’s CitiHoldings division, alongside other businesses it intends to divest over time.

CitiHoldings, created in 2009 as a home for such unwanted and noncore assets, has steadily shrunk over the last two years. In 2010, in perhaps the most significant unloading of CitiHolding assets, the bank sold a student loan business to Discover for $600 million.

“The objective of Citi Holdings is to reduce noncore assets in an economically rational manner that is in the best interests of our stakeholders,” Shannon Bell, a Citigroup spokeswoman, said. She declined to comment on the collapse of the OneMain deal, which was reported earlier by Bloomberg and The Wall Street Journal.

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