Citigroup looking at expansion possibilities

Thursday, March 13, 2003 | 10:58 a.m.

SUN STAFF AND WIRE REPORTS

NEW YORK -- Citigroup Inc., the world's largest financial-services company, plans to buy banks in Texas and Florida to add Hispanic customers as it competes for deposits and fees from the fastest-growing U.S. population group, Chief Financial Officer Todd Thomson told an investor.

"It's an important strategic goal of theirs," said Legg Mason Funds Management Inc.'s David Nelson. He met last week with Thomson and helps manage about 9.3 million Citigroup shares among Legg Mason's $200 billion in assets. Thomson didn't identify potential targets in the two states, Nelson said.

Citigroup's consumer unit accounted for 98 percent of its profit in the fourth quarter amid dwindling demand for underwriting and advisory services. Chairman Sanford Weill paid $5.3 billion for San Francisco-based Golden State Bancorp last year, boosting the market share of Citigroup unit Citibank in California and Nevada.

Thomson said Citigroup is "not dominant in Texas and not dominant in Florida, and would look for opportunities in both states," according to Nelson. The company has no branches in Texas and ranks eighth by deposits in Florida, according to the Federal Deposit Insurance Corp.

"We never discuss acquisition specifics," Thomson wrote in an e-mail to Bloomberg News. He spoke "conceptually in the context of how we think about future capital allocation" when talking to Legg Mason's Nelson, the e-mail said.

The biggest potential acquisition is Atlanta-based SunTrust Banks Inc., Florida's third-biggest bank by deposits, said Richard Bove, an analyst for Hoefer & Arnett Inc., a brokerage in Pinellas Park, Fla.

SunTrust, with a market value of $14.9 billion, bought Huntington Bancshares Inc.'s retail and corporate banking operations in the state last year, giving it a total of 425 branches in there. In 2001, it lost to First Union Corp. its bid to buy Wachovia Corp.

SunTrust spokesman Barry Koling declined comment.

Investors and analysts said five Alabama-based companies are potential Citigroup targets. Colonial BancGroup Inc., Compass Bancshares Inc., SouthTrust Corp. and Regions Financial Corp. have branches in both Florida and Texas. Amsouth Bancorp is in Florida and has no branches in Texas.

"If you want a significant presence in Florida, you've got to buy an Alabama-based bank," said Robert Lowder, chief executive of Montgomery, Ala.-based Colonial, in an interview.

Colonial also has a branch network in Las Vegas competing with banks like Citibank, U.S. Bank, Nevada State Bank, Bank of America and Wells Fargo.

Lowder said he'd talk with Citigroup about selling Colonial. He's the bank's largest stockholder with 5.2 percent of its shares.

"The money those New York banks spend is U.S. dollars, isn't it?" he said. Colonial's market value is $1.3 billion. Citigroup's is $162.5 billion.

Citigroup expanded its reach to Hispanic customers with the Golden State purchase in California and Nevada, and by buying Grupo Financiero Banamex Accival, Mexico's second-biggest bank, in September 2001.

The company's consumer profit jumped 26 percent to $2.37 billion in the fourth quarter from the previous year with results from those acquisitions included for the first time.

Spending power among U.S. Hispanics is expected to jump 80 percent to $926 billion by 2007, according to economists at the University of Georgia. The Hispanic populations in Texas and Florida both grew more than 50 percent in the decade to 2000, according to the U.S. Census Bureau.

Citigroup "plans to grow their Hispanic business in the southern part of the U.S. and sort of marry it with Banamex in Mexico," said Nelson. "It makes a lot of sense."

Last week, Bank of America completed its $1.6 billion purchase of a 24.9 percent stake in Mexico's third-biggest bank, Grupo Financiero Santander Serfin, to expand its business with Hispanic customers.