U.S. News

Citigroup Eyes Big Buys in Germany

By Reuters

Citigroup is on the lookout for acquisitions in Germany and could swoop on a big bank, its local head told Reuters in an interview, news that sent German bank stocks shooting up.

"We are watching the German market very carefully, both locally and globally," said Sue Harnett, Citi's head of German operations. "All eyes are looking for good opportunities."

The news sent stock prices in Germany's three biggest commercial banks rising, making them the biggest gainers on the blue-chip DAX.

Analysts recently said they believed a major cost shake-up at Citigroup, ruled it out of doing a major deal in Europe's biggest economy.

But Harnett said Citi's recent decision to cut costs across the group would not hinder it from making a large purchase. "You have to separate the cost review with mergers and acquisitions (M&A)," she said. "The corporation I work for is very skilled at M&A. We are a big bank. We have lots of money."

"There are a couple of things I would love to have in Germany. I see opportunities both big and small."

There are few banks for sale in Germany -- the state dominates the market with hundreds of publicly owned community lenders, which they do not want to sell.

Citi's private sector rivals in Germany include Commerzbank, Dresdner and Postbank. Of those, Commerzbank is the only one to flag interest in a takeover offer.

Commerzbank's shares were trading up about 2 percent with Postbank and Deutsche Bank rising more than 1 percent in a flat market. Commerzbank and Deutsche Bank were the second and third most active stocks on the market. Other European rivals saw little movement in their share price.

"In our view the more interesting target for them could be Postbank," said Britta Schmidt, an analyst with Fox, Pitt Kelton. "The more available would be Commerzbank. And you can't rule out that they would look at parts of Dresdner although it would be embarrassing for Allianz to sell."

"They could buy Commerzbank and spin off the parts of the business that they do not want -- Eurohypo, for example. But it wouldn't be as good a retail exposure as is Postbank."

Germany's Allianz has also made no signals that it wants to sell Dresdner Bank, although many have questioned the logic of the deal that fused the two and sapped the insurer's profits.

Harnett also said that cut-throat competition among lenders in Germany had depressed overall revenues for Citigroup last year, with no relief in sight.

"The competition in consumer finance is fierce," said Harnett.

"If you walk down the street, if you read a newspaper you are inundated with offers for finance. The key competition right now is on price. I don't see any let-up so far in this competition."