Magazine article American Banker

Citi Moves in China; M&A Limits Lifted?

Magazine article American Banker

Citi Moves in China; M&A Limits Lifted?

Article excerpt

Citigroup Inc. wants to boost its stake in a Chinese bank, is rumored to be close to bidding on another, and recently bought bad loans in the country, but an analyst said the moves could be more instructive about the company's relationship with regulators than its strategy in China.

The $1.47 trillion-asset Citi has been on the sidelines in the consolidation game since March, when the Federal Reserve Board advised it to avoid dealmaking while it focused on a plan to fix internal-control weaknesses. Charles Prince, Citi's chief executive, has said it would finish implementing the plan by yearend.

Citi is thought to be one of three bidders for a majority stake in Guangdong Development Bank, China's 11th-largest bank. The winning bidder is not expected to be chosen until the first quarter. The deal would be the first by a foreign bank for a controlling stake in a Chinese bank.

Richard Bove, an analyst with Punk, Ziegel & Co., said Citi's maneuvering in China is evidence that the Fed's restriction is no longer operative.

"It is quite possible that Citigroup and the Federal Reserve have come to an agreement lifting this restriction," Mr. Bove wrote in a report issued Monday. "If so, there is not likely to be any announcement indicating that this is the case. Investors will be aware of the new status once Citigroup announces an acquisition."

The central bank said in a March 16 order that it "expects" Citi's managers to devote attention to addressing internal problems and "not undertake significant expansion during the implementation period. …

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