Citigroup (NYSE:C) recently paid approximately $1.13B for Egg, the largest pure online bank in the world. Taking a quick look at the numbers, Citi acquired approximately 3M credit card customers and approximately $18.6B in assets (as of December 31, 2006). This represents a small increase to the total asset base of Citi, which is now greater than $1.8 trillion.
A comparison to recent past mergers, on a dollar paid per asset dollar acquired basis, shows that either Citigroup got a great deal or other banks overpaid. Bank of America (NYSE:BAC) paid $48B for FleetBoston Financial in 2004, which had $196B in assets at the time. It also paid $35B for MBNA in 2005, which had $123B in credit loans.
J.P. Morgan Chase (NYSE:JPM) paid $58B for Bank One in 2004, gaining $320B in assets. Wachovia (NASDAQ:WB) paid $25B for Golden West in 2006, acquiring over $125B in assets, and $14.3B for SouthTrust in 2004, which had $54B in assets. Regions Financial (NYSE:RF) paid $10B for AmSouth in 2006, acquiring $58B in assets.
The purchase of Egg represents minimal risk for Citigroup. It is acquiring an online bank with online assets, which can be combined with Citi’s current online technology or maintained separately. The deal also represents a fourfold increase in U.K. customers and increases Citi’s U.K. market share from under 1% to approximately 7%.
Disclosure: The author does not have a position in any stocks discussed at the time of writing.
C 1-yr chart