Still licking its wounds following a failed bid to buy Wachovia Corp., Citigroup Inc. is on the prowl again and is in talks to acquire a regional bank, according to media reports Monday.
The Wall Street Journal reported that Citigroup is looking to acquire a regional bank that overlaps the geography of its retail operations, less than a month after it walked away from Wachovia.
A Citigroup representative declined to comment.
In an effort aided by the Federal Deposit Insurance Corp., Citigroup tried to acquire Wachovia before Wells Fargo & Co. made a larger offer that did not rely on help from the government. After various lawsuits were filed over who was the rightful purchaser of Wachovia, Citigroup withdrew its bid. Wells Fargo is proceeding with its bid — valued at $12.7 billion in stock — and expects the acquisition of the Charlotte, N.C.-based bank to close by the end of the year.
Many analysts have expected Citigroup to strike again, and the bank has said it would likely use a $25 billion investment from the government — part of the $700 billion financial rescue package passed by Congress last month — to take advantage of opportunities in the market.
But the company's third-quarter results heightened concerns that Citi — hampered by the relentless downturn in housing and turmoil in the financial markets — may not be in the best position to make an acquisition.
Of the four major U.S. banks — Citigroup, JPMorgan Chase & Co., Bank of America Corp. and Wells Fargo — Citi has been on the shakiest footing, reporting losses in the past four consecutive quarters while its rivals have managed to post profits, albeit dampened ones. Analysts polled by Thomson Reuters, on average, expect the New York-based bank to record quarterly losses through the first quarter of next year.
Last month, Citigroup said it lost $2.8 billion, or 60 cents per share, during the third quarter. The deficit for the July-to-September period brings Citi's total losses over the past 12 months to $20.2 billion.
The bank has written down the value of investments tied to souring mortgages and other bad debt by some $51 billion since the end of the third quarter last year — the most of any other bank.
Citigroup has also forfeited the title of largest U.S. bank by assets as its competitors have made major acquisitions to bolster their operations amid the economic downturn.
Aside from Wells Fargo acquiring Wachovia, JPMorgan bought Bear Stearns Cos. in March and acquired Washington Mutual Inc. in September after the Seattle-based bank was seized by federal regulators.
Meanwhile, Bank of America acquired troubled mortgage lender Countrywide Financial Corp. and investment bank Merrill Lynch & Co. this year.
Nancy Atkinson, senior analyst at Boston-based research firm Aite Group, said at this point it is hard to tell which bank might be Citigroup's bull's-eye, but mentioned SunTrust Banks Inc., Regions Financial Corp., BB&T Corp., Comerica Inc. and Zions Bancorp as possible targets.
"(Citigroup) made it pretty clear when they finally bowed out of the Wachovia deal, 'We still want to be in the market for something,' " said Atkinson. "I think that Citi is looking to show their might still."
Citi is looking to expand its presence in the U.S. as a way to offset a growing economic downturn in other parts of the world, where it has a significant presence, she added.
"They're looking for inexpensive deposits," she said. "I think they believe this market will turn around more quickly than some of the others."
Citigroup shares dropped 50 cents, or 4.2 percent, to $11.33 in afternoon trading. Shares have traded between $11.31 and $37.50 in the past 12 months.