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Fri, Jun 04, 2004 - Page 12 News List

Citigroup, HSBC play down reports of US purchases

ACQUISITIONS Top officials at the two banks tried to quash rumors of more mergers, saying they believed US retail banks are overvalued


Citigroup Inc and HSBC Holdings Plc, two of the world's largest banks, on Wednesday dampened investor expectations that they may soon buy large US retail banks.

Citigroup chief executive Charles Prince said US retail bank valuations are "out of line." He said the world's No. 1 financial services company will wait for lower prices, while continuing its focus on expanding its existing businesses.

Meanwhile, Douglas Flint, HSBC's finance director, said Britain's largest bank is focused on developing newly acquired businesses, such as consumer finance company Household International Inc. HSBC's US banking operations are already among the 10 largest.

The announcements contributed to a 3.6 decline in shares of Washington Mutual Inc, the largest US savings and loan. The Seattle-based company was last month the subject of speculation that either Citigroup or HSBC might buy it. Its shares rose 9 percent on May 21 when the HSBC rumors peaked.

A wave of US bank mergers began in earnest last October, when Bank of America Corp agreed to pay US$47 billion for FleetBoston Financial Corp. Then in January, J.P. Morgan Chase & Co agreed to pay US$58 billion for Bank One Corp. Many smaller banks have also agreed to buyouts.

"Expectations of sellers are higher than what perceived buyers are willing to pay," said Bob Maneri, an analyst at Victory Capital Management in Cleve-land, Ohio.

"For more than just WaMu, but perceived sellers among banks in general, it means they may not get the prices they had hoped for," he said.

Speaking at a Sanford C. Bernstein & Co conference, Prince said Citigroup will consider acquisitions in global transaction services, which provide securities servicing, cash management and other services.

But Prince said US retail banks appear too costly, though the company has often said it wants to expand in the northeast, California, Florida and Texas.

"We're in a cycle where the pricing on US retail branches is out of line," Prince said. "We'll wait for the next time when those activities are more moderately valued."

HSBC suggested it is unlikely to soon follow British rivals in making another big US retail banking push.

Flint said HSBC would look at smaller purchases, particularly in Asia.

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