Citigroup buys in China ahead of cost review
Citigroup is buying a Chinese bank for $426m and is also said to be in talks to acquire a $600m hedge fund just two days before it unveils details of cost-cutting plans.
Citigroup acquired Taiwan's Bank of Overseas Chinese for $426m. The deal will go some way to fulfilling chief executive Charles Prince's goal of drawing 60% of its revenues from international markets, an increase from the current level of 45%.
To that end, the BOOC acquisition is Citigroup's third within six months in Asia. Last month, Citigroup said it would buy Japan's Nikko Cordial for $14bn. The bank also led a consortium that bought a majority stake in China's Guangdong Development Bank for $3.1bn last November. Citigroup also plans to quadruple its stake in
Shanghai Pudong Development Bank to 19.9%, and to hire 10,000 staff in Asia to boost its investment banking business there.
Citigroup convinced insurer New York Life to sell its 4.5% stake and Taiwan's Polaris Financial to sell its 42% stake in Bank of Overseas Chinese to clear the way for the deal. Citigroup has been in China since 1902, but has had a rocky road to growth in the region. In 2000 the bank bought 15% of Taiwanese insurer Fubon Financial, but sold the stake in 2004.
The US bank may also buy Old Lane Capital, a hedge fund owned by Vikram Pandit, a former head of Morgan Stanley's institutional securities business, according to a report in today's Wall Street Journal. The acquisition, which may be worth as much as $600m, would open the way for Pandit to take a high-placed position within Citigroup's struggling alternative investments unit. The unit lost chief Michael Carpenter in 2006 and survived the spinoff of its former private equity operations into a new firm called Court Square Capital. Citigroup has since announced plans to create a new in-house fund.
Citigroup German retail banking executive Sue Harnett also indicated that the bank may seek to buy retail banks in Germany.
While Citigroup is spending in areas like Asia, it plans to cut in many others. Last year Citigroup grew its operating expenses 15% to $52bn, while revenues grew at only around 7%. Citigroup launched a review of its expenses this year after Prince promoted veteran Robert Druskin to chief operating officer and hired Gary Crittenden from American Express as chief financial officer.
Source: Financial News
Date: 09.04.2007 [ID: 9]