Citigroup eyes up UK banks

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The Independent Online

Citigroup, which earlier this year paid £1.3bn for City merchant bank Schroders, is eyeing another major purchase in the UK. The US giant is understood to want to buy a UK high street bank, and is looking closely at Abbey National and Alliance & Leicester.

Citigroup, which earlier this year paid £1.3bn for City merchant bank Schroders, is eyeing another major purchase in the UK. The US giant is understood to want to buy a UK high street bank, and is looking closely at Abbey National and Alliance & Leicester.

The US financial giant is understood to want to expand its presence in the UK retail market and has run the rule over Woolwich before Barclays launched its £5.4bn offer. That deal was criticised by some investors as being too expensive, but has prompted a flurry of speculation in the markets.

Buying Abbey would be a massive deal, even for Citigroup. The bank, whose shares have been bolstered in recent weeks by bid speculation, was valued on Friday at £11.5bn. In order to win the company, Citigroup would need to pay at least £14bn.

In recent weeks, though, Abbey has signalled that it is not for sale. Its chief executive, Ian Harley, has positioned the group as a buyer not a seller, and it has shown interest in Scottish Provident and Equitable Life, two mutual life assurers that have put themselves up for sale.

However, only two years ago Abbey was in talks with NatWest which would have resulted in it being taken over. That deal fell apart in a dispute over price, a move that ultimately led to NatWest being bought by Royal Bank of Scotland.

Alliance & Leicester would be a cheaper and easier purchase. While it has recently ended its nine-month search for a chief executive with the appointment of Peter McNamara from Lloyds TSB, investors are still concerned about the group's long-term future and strategy.

However, a City banking analyst questioned whether Citigroup would want to take control of Girobank, Alliance & Leicester's subsidiary which operates through post offices and has a large number of low-earning customers.

Citigroup, through its banking subsidiary Citibank, has made a number of attempts to break into the British retail financial services market. However, the group, which is the US's largest financial institution, has been singularly unsuccessful in building its own business.

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