Purchase will create 6th largest servicer, 7th largest originator
By SAM GARCIA
5/22/2002

Citigroup announced that it will purchase Golden State Bancorp, the indirect parent of First Nationwide Mortgage. Citigroup will pay about $16.40 in cash and 0.5234 Citigroup shares for each share of Golden State.

The company said the acquisition will make its conforming mortgage business the 7th largest loan originator, up from the tenth spot currently. Citigroup also said it will become the nations 6th largest servicer of these loans, up from number nine.

The $5.8 billion acquisition appears to be at least partly motivated by Citigroup's desire to capitalize on California's Hispanic community. "By expanding our presence in California, we are also increasing our access to the Hispanic community," said Robert B. Willumstad, President of Citigroup. The Wall Street Journal reported that Citigroup's purchase of Mexico's largest bank, Grupo Financiero Banamex-Accival SA, last year for $12.5 billion will help position it to be a "cross-border institution for Mexicans and Mexican immigrants in the U.S."

Citigroup reported that first quarter income from its mortgage banking operations was up 24% from last year to $93 million.

Golden State is the parent company of Cal Fed, the second largest thrift in the U.S. The First Nationwide unit is part of Cal Fed. The company primarily operates in California and Nevada, and this move is an important step in Citigroup's efforts to significantly expand the scope and breadth of its services in those states.

The transaction inversely resembles west coast-based Washington Mutual's recent acquisition of the east coast thrift Dime Bancorp, Inc. That move significantly increased Washington Mutual's presence in New York.

While Citigroup has faced predatory issues as a result of its acquisition of The Associates, it has continued to see reduced expenses as a result of the efficiencies from the integration of The Associates with its own CitiFinancial unit.

The Golden State transaction is expected to close in the fourth quarter of this year.

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