Wednesday, April 05, 2006
FT.com / Lex - Lex: Citigroup
For Citigroup, the lifting of a year-long ban on big acquisitions could hardly have come at a more opportune moment. Admittedly, banking valuations look high in much of the world, limiting the appeal of major transactions. Moreover, it probably would have taken a more sizeable deal than the ones recently on Citigroup's radar screen for the Federal Reserve Bank of New York to block it.
But the Fed's decision comes just days after Citigroup's latest run-in with regulators, this time in Australia. Given its string of embarrassments in managing conflicts of interest, a pat on the back by Citigroup's main US supervisor for its new compliance regime is welcome.
The bigger question remains whether the world's largest bank is already paying a price for its sheer size. While small in itself, the Australian dispute highlights the difficulties of managing far-flung outposts to satisfy local regulators, global best practice and shareholders at the same time.
To its credit, Citigroup seems to recognise as much. Its next few purchases are likely to be limited to boosting its retail presence in emerging markets, where the bank's brand-name and technological platform may well give it an edge over local rivals. As an alternative to boosting earnings by betting more of its own money, it also has the merit of creating fewer conflicts of interest.
Together with other steps, such as branch expansions in existing markets, that may eventually help enhance its growth prospects relative to US peers.
Investors hoping for as much should remember, however, that regular buying sprees are what made Citigroup great. Proving that it can run its cumbersome empire eff"
But the Fed's decision comes just days after Citigroup's latest run-in with regulators, this time in Australia. Given its string of embarrassments in managing conflicts of interest, a pat on the back by Citigroup's main US supervisor for its new compliance regime is welcome.
The bigger question remains whether the world's largest bank is already paying a price for its sheer size. While small in itself, the Australian dispute highlights the difficulties of managing far-flung outposts to satisfy local regulators, global best practice and shareholders at the same time.
To its credit, Citigroup seems to recognise as much. Its next few purchases are likely to be limited to boosting its retail presence in emerging markets, where the bank's brand-name and technological platform may well give it an edge over local rivals. As an alternative to boosting earnings by betting more of its own money, it also has the merit of creating fewer conflicts of interest.
Together with other steps, such as branch expansions in existing markets, that may eventually help enhance its growth prospects relative to US peers.
Investors hoping for as much should remember, however, that regular buying sprees are what made Citigroup great. Proving that it can run its cumbersome empire eff"
