Possibilities for Merged Citicorp and American Express Abound

By Fickenscher, Lisa; Block, Valerie | American Banker, July 10, 1997 | Go to article overview

Possibilities for Merged Citicorp and American Express Abound


Fickenscher, Lisa, Block, Valerie, American Banker


A merger between Citicorp and American Express Co. has captured the imaginations of securities analysts, corporate strategists, and heads of many financial service businesses, especially credit cards.

And it's only a rumor.

Getting beyond the speculation-which has flared several times in recent months, fueling a rise in American Express' share price-knowledgeable observers see considerable logic in the hypothetical combination.

For what could be a $40 billion price, Citicorp could fulfill the ultimate objectives of the globalization strategy it has long been pursuing. It would more than double its consumer banking offices and assets under management for corporate and individual clients; bolster what is already regarded as the most sophisticated array of technologies at any banking institution; and open considerable distance between itself and the next-largest companies in the credit and charge card field.

In the American Express name, Citicorp would own the brand that marketing experts regard as second in financial services strength. No. 1 is Visa-Citicorp's Citibank is the largest Visa card issuer-and Citibank itself surely ranks among the top 10 industry brands.

The possibilities are mind-boggling. But so, apparently, are the obstacles, ranging from corporate culture issues to legal technicalities. These may explain why the deal has not gotten done-Citicorp chairman John S. Reed disclosed in April that the companies had done some talking-and why the market has been of two minds.

Last Thursday, as Amex's share price jumped by almost $7, a card industry consultant said he had knowledge of strategy meetings taking place between the two New York financial giants.

But another credit card source said Tuesday of the purported progress, "The latest we are hearing is it is going nowhere."

Perhaps the most obvious roadblock is Citibank's membership in Visa International and MasterCard International. Both card associations have rules prohibiting members from issuing American Express cards, and Citibank might have to go through contortions to retain the prized Amex brand.

A more farfetched possibility, though still unspoken in the card industry: Citibank could drop out of Visa and MasterCard and take a more proprietary course, converting its cardholders to American Express products.

"A big portion of that $40 billion of market value is the (American Express) brand," said analyst Moshe Orenbuch of Sanford C. Bernstein & Co. Citicorp should "absolutely keep the brand," he said.

Both Citicorp and American Express could in other ways be strongly motivated to make a deal that would shake up each of their business lines and the world financial services market as a whole.

"Citi has to do something right now," said James Accomando, a credit card consultant in Fairfield, Conn. "Competition has encroached upon them very rapidly," he said, noting that Banc One Corp.'s acquisition of First USA Inc. and growth of other monoline credit card issuers like MBNA Corp. and Capital One Financial Corp. have eroded Citicorp's market-share lead in its most profitable activity.

He said the recently announced demise of the Citibank-Ford cobranded credit card could affect 7.5 million of Citibank's 40-plus million U.S. cardholders.

"They are poised for something very large," Mr. Accomando said. "Whether it's Amex, who knows?"

American Express, meanwhile, has been desperately seeking ways to grow on its charge card foundation. The MasterCard-Visa rules have limited American Express' ability to ally with banks. It lost a court battle when it tried to do an end-run with Advanta Corp., tying American Express benefits to the bank-owned card brands.

"American Express almost has to be a bank to be viable going forward," said Alan Bergstrom, president of the Brand Consultancy, Atlanta. He estimated the American Express brand is worth at least several billion dollars, and has an upscale cachet that would help Citicorp. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Possibilities for Merged Citicorp and American Express Abound
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.