Citigroup Goes the Global Route

Earlier I discussed why Citigroup (C) was different than the other big U.S. banks. Citigroup is a large global bank while its main domestic competitors, Bank of America (BAC) and J.P. Morgan Chase (JPM), are much stronger within the U.S.

Citigroup is also taking a different route for growth within the U.S. than the large mergers being done by its competitors (Bank of America merged with FleetBoston Financial in 2004 and MBNA in 2005, while J.P. Morgan merged with Bank One in 2005.) Granted, Citi had a Federal Reserve imposed moratorium on any acquisitions.

Even after the moratorium lifted, though, the company continued its slow and steady ways within the U.S. by expanding its retail presence organically, expanding its retail partner credit card operations via a deal with Federated Department Stores, and establishing a deal with 7-Eleven, greatly expanding its ATM network.

Internationally though, Citigroup is expanding rapidly via acquisition and organic growth. The company recently acquired two financial institutions in Central America, Grupo Uno Financiero, the largest credit card issuer in Central America, and Union de Bancos Cuscatlan, a large Central American bank. Citi also bought Quilter, a U.K. wealth manager. Additionally, the company acquired management control of Guangdong Development Bank in China, large stakes in Akbank of Turkey, and HDFC, the large Indian mortgage lender. Organically Citi added 862 retail bank and consumer finance branches.

In January of 2007, Citi announced the acquisition of the mortgage business of ABN Amro, adding 1.5 million customers and 2,500 brokers. Finally, the company announced last week that they purchased the world’s largest pure online bank, Egg, which is based in the U.K.

Clearly Citi continues its strategy of expanding globally. Most of the acquisitions in 2006 and early 2007 either strengthened existing businesses or expanded the company’s footprint. For example, the Central American purchases give Citi a retail presence from Texas and southern California through Mexico into South America. A strong potential for growth also exists as many of the acquired operations are in countries which have rapidly expanding economies and increasingly wealthy citizens.

Disclosure: The author does not have a position in any stocks discussed at the time of writing.

C 1-yr chart