Citigroup Merger Ban Lifted; Eyes Saudi Arabia

By Mike Bevel, CollectionIndustry.com

Christmas came early for Citigroup. The largest U.S. bank was freed Tuesday from the Federal Reserve Bank of New York's yearlong ban on big mergers.

The ban came a year ago, after the N.Y. Fed approved Citigroup's purchase of First American Bank, Houston. In a move that sent mixed messages to the banking giant, the Federal Reserve Bank's approval of that deal came attached with some harsh language: "Given the size, scope and complexity of Citigroup's global operations, successfully addressing the deficiencies in compliance risk management that have given rise to a series of adverse compliance events in recent years will require significant attention."

In order for the ban to be lifted, Citigroup would have to show significant progress on its five-point plan. "Implementing the five-point plan is our top priority and it is the right way for Citigroup to engage in sustained long-term group," Citigroup said in a statement after the ban was affected in March of 2005. And, at least as far as the Federal Reserve Bank of New York is concerned, it has.

William Rutledge, executive vice president of the N.Y. Fed, wrote in a letter to Citigroup dated April 3 that, due to the progress made, "the understanding that you would refrain from significant expansion is no longer in operation." Rutledge did add the caveat that the Fed would carefully review any future expansion proposals undertaken by Citigroup.

In an internal memo, Citigroup chief executive Charles Prince congratulated staff for the hard work and determination the company showed, adding, "We are fully focused on our strategic initiatives, which emphasize our organic growth opportunities, and build on our capabilities in attractive businesses and geographies."

Citigroup's first move sans ban might be a return to Saudi Arabia. In a Reuters story filed yesterday, the bank said that it was looking at a return to the Middle East after selling its stake in Saudi Arabia's Samba Financial Group two years ago. The recently uplifted ban had proven to be a significant obstacle in Citigroup's international expansion.

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