Rebuffed by Wachovia, Citigroup looks to acquire regional bank
10 Nov 2008
After being bested by Wells Fargo in its attempt to acquire distressed bank Wachovia, Citigroup is reportedly in talks to buy an unnamed US regional bank. The potential acquisition does business in some of the same areas in which Citigroup has retail-banking operations, such as the Northeast, California and Texas, The Wall Street Journal reported today. (See: Citi fumes as Wells Fargo steals Wachovia)
The paper cited unnamed people familiar with the situation who said there could be an agreement by month's end but didn't name the target bank. After the failed bid to acquire Wachovia, senior management at Citigroup was reported to be in considerable disarray. Some board members have felt they weren't sufficiently kept in the loop, while some executives groused that directors are trying to wield too much clout, people familiar with the matter say.
However, a successful new acquisition is expected to boost morale. Additionally, it will demonstrate new CEO Vikram Pandit's will to expand the bank's deposit base in the US. Such deposits are relatively cheap and a reliable funding source that makes them even more attractive as turmoil continues to swirl through the capital markets.
Last month, Citigroup reported a surprising leap in third-quarter losses on loans in Brazil, India and Mexico, while warning that deteriorating conditions in Colombia, Greece, Italy, Japan, Spain and elsewhere were possible harbingers of rising consumer defaults. The New York company's sizable operations in economies that have been relatively unscathed by the financial crisis, such as Argentina and Turkey, also could be vulnerable.
Citigroup does business in 106 countries on six continents. Its closest rival, HSBC Holdings PLC, operates in 85 countries. US-based J.P. Morgan Chase & Co., Bank of America Corp. and Wells Fargo exceed Citigroup in stock-market value but have little or no international retail presence.
Overall, Citigroup gets about half its revenue from outside the US. Around the world, Citigroup offers retail banking, credit cards and wealth-management services to consumers, while providing corporate clients with investment banking, cash management and transaction processing.
As part of the Bush administrations multi-billion dollar package to aid the nation's banks, Citigroup has been fortified with $25 billion in taxpayer-funded capital from the US Treasury Department. Although this provides it with an expansive war chest for new acquisitions, some lawmakers have complained that federal infusions should be funneled into loans instead of buying new assets.
