Citicorp is preparing to jump back into merchant processing, a part of the credit card business from which it has been frozen out for five years.

The banking company has signaled its intentions by naming Denis A. Calvert, formerly of Verifone Inc., head of a new retail and merchant services division.

The appointment precedes the June 30 expiration of the noncompete agreement that prevented Citicorp from processing credit card transactions on behalf of U.S. retailers. Citicorp is thus on the verge of taking on First Data Corp. and others that have taken merchant-servicing business away from banks in recent years.

It is one of merchant processing's supreme ironies that Card Establishment Services, the merchant unit that Citicorp sold in 1992, was acquired by First Data in 1995.

Citicorp has made no official announcement about its merchant processing intentions, nor about Mr. Calvert's employment. A spokeswoman, Susan Weeks, confirmed he will start next week, probably based at Citicorp's Long Island City, N.Y., building.

Mr. Calvert spent eight years at Verifone, most recently as executive vice president of the Americas. The Redwood City, Calif., payment automation company did not comment on Mr. Calvert's departure.

He will be in charge of Citicorp's merchant business in Europe-an activity it retained after the sale of Card Establishment Services. He will also head the private-label card unit known as Citicorp Retail Services, as well as Citicorp Travelers Checks.

Citicorp would not address speculation that the new division will offer merchant services in the United States. Ms. Weeks described Mr. Calvert's responsibility as "a global strategy for merchant and retail services."

Industry observers said it is imperative for Citicorp to reenter the merchant side of the card business to beat back U.S. competitors that can market services to Citicorp's retailing clients.

While Citicorp has maintained a significant merchant-acquiring presence overseas, there's a big void in the United States, which accounts for roughly half of global card volume.

Citicorp was in need of capital in 1992 when it transferred what was then known as Citicorp Establishment Services to the investment firm Welsh, Carson, Anderson & Stowe for $175 million.

The resulting noncompete clause left Citicorp out of the domestic part of a business it had started in 1967.

"In general, people would be very surprised if Citibank does not get back in," said Robert E. Hyer Jr., director of the financial institution group at Smith Barney Inc. "Citibank has the financial wherewithal to do whatever it wants. It just depends on whether they want to build it up slowly or not."

Having recovered from the woes of the early 1990s, the $281 billion- asset holding company could make acquisitions or build a merchant business from the ground up.

Citicorp is regarded as unlikely to form an alliance or joint venture with First Data, as Chase Manhattan Corp. said it would do at the end of last year.

Citi "could not align with First Data," said one consultant. "There is nothing to gain for either party, because Citibank has no accounts to give them. Chase wanted to be in the business and had the resources to generate new business."

Others said because Citicorp's noncompete clause did not extend to international operations, the bank is more likely to reenter through an overseas route.

Citicorp said it has developed merchant-acquiring and processing operations in Europe, Latin America, and Asia.

"Some companies want a single provider across geographical areas," said an analyst who requested anonymity. "Citicorp could respond to this need."

This observer said that First Data has been busy consolidating its gains in the United States, leaving overseas markets more open.

Because it stayed in merchant servicing elsewhere, Citi "doesn't have to reinvent the technology they sold with CES," said Paul Martaus, president of Martaus & Associates in Clearwater, Fla. "They can hit the ground running with a well-run, well-regarded platform."

Meanwhile, Citicorp has to protect its banking relationships with U.S. retailers, said Richard N. Speer, chairman and chief executive officer of Speer & Associates in Atlanta. It is "vulnerable to the extent that the new Chase and others are competing."

"Long term, there is the belief that at the low end of the market, these small commercial relationships and retailers are very profitable business for the banks," Mr. Speer added. "But they are very difficult to serve through traditional means and very expensive."

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