PNC one possible Citigroup target
Citigroup Inc., the world's-largest financial company, is getting an increasing slice of its earnings from lending to individuals. And Chief Executive Officer Sanford Weill, who made more than $50 billion in acquisitions in the past three years, may make a U.S. consumer bank his next purchase.
"We know this management team is acquisitive," said Bill Rubin, who helps manage $180 billion at Dreyfus Corp., including 18 million Citigroup shares. He said he expects New York-based Citigroup to buy another lender.
Among Citigroup's potential targets are FleetBoston Financial Corp., PNC Financial Services Group and SunTrust Banks Inc. Each of these banks would complement existing Citigroup branch networks concentrated in the greater New York metropolitan area, California, Illinois and Florida, said Marshall Front of Front Barnett Associates, who recently built a Citigroup stake to 1.2 million shares in the $1.5 billion managed by Front Barnett Associates LLC
PNC spokesman Brian Goerke, speaking for CEO James Rohr, said the bank intends to remain independent. SunTrust spokesman Hugh Suhr, FleetBoston spokesman James Mahoney and Citigroup spokeswoman Leah Johnson declined to comment. Weill didn't respond to a request for an interview.
Citigroup probably earned 80 cents a share in the three months to the end of June, a 2.7 percent increase from a year earlier and the second consecutive quarterly gain, according to 16 analysts surveyed by Thomson Financial. Lending for mortgages, cars and credit cards may account for 54 percent of profit from operations, up from 51 percent a year ago, according to Henry McVey, an analyst at Morgan Stanley.
The increase in consumer banking followed acquisitions in the past three years by Weill, 70, including Golden State Bancorp, the second-largest U.S. thrift; Grupo Financiero Banamex-Accival, Mexico's second-largest bank; and Associates First Capital Corp., the biggest U.S. consumer-finance company.
"Sandy Weill has made a good bet because the consumer is probably in better shape than some people think," said Front of Front Barnett Associates.
Citigroup shares gained 24 percent in the second quarter, exceeding the 21 percent rise in the Philadelphia/KBW Bank Index. The advance lifted its shares to 14 times forecast earnings, giving Weill a stronger currency to make acquisitions. The stock yesterday rose 95 cents to $46.15 in New York Stock Exchange Composite trading.
Citigroup has U.S. deposits of $183 billion. That's behind Bank of America Corp., with about $364 billion; Wells Fargo & Co., with $230 billion; and Wachovia Corp., with about $191 billion, according to the Federal Deposit Insurance Corp.'s Web site.
"We don't see ourselves as the market leader either in the U.S. or internationally" in consumer banking, Citigroup President Robert Willumstad said May 29 at a presentation for investors. "This is the biggest opportunity for growth for us and obviously acquisitions are part of that strategy."
It also has no shortage of cash. Citigroup had $20 billion of cash at the end of the first quarter and it recently filed with the Securities and Exchange Commission its intention to issue $15 billion in securities for general corporate purposes.
"It gives them the flexibility to put cash in an acquisition," Rubin said.