Citigroup has told bidders for its Japanese retail banking operations that it was looking to sell its profitable Diners Club card business in Japan with the retail unit, sources with knowledge of the matter said.

The US bank has been preparing to sell its Japanese retail unit after having struggled to turn around the business amid weak loan demand and falling interest margins in Japan's banking industry.

On Friday, about 10 banks including Japan's top three lenders Mitsubishi UFJ Financial Group, Mizuho Financial Group  and Sumitomo Mitsui Financial Group participated in the first round of bidding for the retail business, the sources said.

Resona Holdings, Sumitomo Mitsui Trust Holdings and Shinsei Bank as well as some regional banks also submitted preliminary bids, said the sources, declining to be identified as the bidding was not public.

Citibank and the six Japanese lenders declined to comment.

Citibank's Japanese retail business has drawn interest from suitors hoping to take over its wealthy clientele. It has some 3.6 trillion yen ($33.6 billion) in deposits, of which close to 2 trillion yen is dollar-denominated, and this is seen as attractive for Japanese banks seeking stable procurement of foreign currencies, the sources said.

However, it is effectively losing money, weighed down by labor costs at its 33 branches in Japan. Citibank is therefore also seeking to sell the Japanese credit card business to entice bidders, the sources said.

Citibank does not plan to sell the credit card business on its own, they added.

In another development, the US bank said it was planning on taking its OneMain Financial personal loan business public by September end.

OneMain, which is worth at least $4 billion, is expected to start considering offers from potential buyers, reported Bloomberg citing people with knowledge of the matter.

In May, CEO Mike Corbat said at an investor conference that Citigroup could dispose of the company through an outright sale to a private equity firm, a public stock offering, or a combination of the two, if prices are good.

OneMain makes subprime loans to individuals and is profitable but does not fit the company's strategy, Corbat had said.

Rival installment loans providers SpringLeaf Holdings is interested in acquiring OneMain, the report added.-Reuters