Citigroup eyes big buys in Germany
FRANKFURT (Reuters) - Banking giant Citigroup (C.N) 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 .GDAXI.
Markets are on high alert for big deals in the wake of Barclays's (BARC.L) exclusive talks with ABN AMRO AAH.AS to create the world's fifth-biggest bank, closing the gap on Citigroup, the largest by market capitalization.
Many analysts had recently said Citi's cost shake-up ruled it out of a megadeal in Europe's biggest economy. But Harnett said the group's cost-cutting 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."
Few banks are for sale in Germany, where the state dominates the market with hundreds of publicly owned community lenders, which they do not want to sell.
Citi's private-sector rivals include Commerzbank (CBKG.DE), Dresdner Bank (ALVG.DE) and Postbank (DPBGn.DE). Of those, Commerzbank is the only one to have flagged interest in being taken over.
Commerzbank's shares were trading up more than 3.5 percent with Postbank up nearly 1.5 percent and Deutsche Bank rising more than 1 percent in a flat market.
Commerzbank and Deutsche Bank -- with whom Citi once explored a merger -- were the second and third most actively traded stocks on the German market. Other European rivals in the DJ Stoxx European banking index .SX7P slipped slightly.
"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 made no signals that it wants to sell Dresdner, although many have questioned the logic of the deal that fused the two and sapped the insurer's profits.
The cut-throat competition in the German market and the strength of the state in lending makes acquisitions important for growth.
Harnett said 2006 had been difficult, with competition among lenders depressing overall revenues for Citigroup in Germany.
"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."
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