So Capital One Financial Corp. acquired Chevy Chase Bank FSB for nearly $520 million Thursday. Citigroup Inc. reportedly was one of several potential acquirers for the Maryland-based lender, but in the end was left out in the cold. The news that Citigroup was
pushed aside isn't shocking considering its recent bailout, which has renewed pressures on Citigroup CEO Vikram Pandit (pictured) to slim down the firm rather than to expand it.
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McLean, Va.-based Capital One's acquisition of Chevy Chase, meanwhile, will expand its presence in the mid-Atlantic markets -- especially in the affluent Washington suburbs -- but more importantly it expands its deposit base as it faces potential recession-related issues with its credit card business. After completing the Chevy Chase purchase, Capital One will have deposits of more
than $110 billion, a
managed loan portfolio of more than $159 billion and 983 branches.
So Capital One has clearly executed a plan to cope with the credit crisis and recession, but has the Chevy Chase acquisition left Citi without one?
Citi CEO Pandit's prebailout strategy reportedly was to acquire a large retail bank or even a regional bank to gain deposits that would buttress its losses and build out its retail bank network in order to keep up with its chief rivals J.P. Morgan Chase & Co. and Bank of America Corp. First Citi tried to acquire Wachovia Corp., but was bullied out of the deal by Wells Fargo & Co, a smaller rival that now will join BofA and J.P. Morgan as top retail banking rivals. Did Citi get bested again by a smaller rival, or did it drop out of the Chevy Chase auction because of its troubles?
It makes one wonder what Pandit's strategy is. Will he still use acquisitions of retail banks as a means to restructure Citi? And if acquisitions are part of the plan, can the bank even compete with rivals in the M&A market given its health? An acquisition takes cash, time, and a lot of talented staff. Citi has bought some time thanks to the U.S. government, and while there are plenty of troubled regional banks to choose from, Citi's health puts it in a weak position in the bidding process, meaning it could get bested by rivals over and over again.
Making matters worse, Bloomberg
suggests Citigroup is going to have some major write-downs it will need to communicate to investors soon. Bloomberg figures the bank has about $2.1 trillion on its balance sheet and questions what the government's guarantee covering about $306 billion of the bank's assets against most losses actually means.
So time will tell if Citigroup will acquire a regional bank. -
Maria Woehr
Comments
Capital one is one of the worst people to owe money to. They are abusive and try all kinds of tricks toget money.