After sitting out a wave of mergers and acquisitions in the banking and mutual fund industries, Citicorp appears to have stepped up its search for a money management firm.

But the banking behemoth may have waited too long. If Citicorp were to buy a mutual fund or other asset management company now, it would most likely pay a hefty price.

Indeed, the company reportedly aborted buyout negotiations with American Express Co. this month, partly due to a disagreement over price. Analysts have estimated that American Express, with its prestigious charge card business as well as a $140 billion-asset management unit, could command as much as $40 billion.

News of the talks rekindled interest in Citicorp's money management acquisition plans, which were first ignited by remarks made by chairman John S. Reed at the banking company's annual meeting in April. Today, with a market capitalization closing in on $50 billion, Citicorp is believed to be one of the only U.S. banks that has the wherewithal to do such a deal.

"They're not interested in buying another bank, so a mutual fund (company) makes a lot of sense for them," said John Duffy, director of corporate finance at Keefe, Bruyette & Woods Inc.

The bull market for stocks has made money managers - especially those that offer mutual funds - an expensive commodity in recent months. While mutual fund companies are still going for the same eight to 10 times earnings they have always commanded, their earnings have been sky-high of late.

That has prevented many banks from entering the fund consolidation fray. And those that have made acquisitions have thought small.

According to Bruce Brewington, an analyst at Putnam Lovell & Thornton in San Francisco, banks bought 34% of all money management assets sold from 1988 through 1993 and were involved in 16% of all money management deals. In 1994 and 1995, they bought only 12% of assets sold but were in 22% of the deals.

But if any bank could do a big deal - even at a steep price - it's Citicorp, analysts said.

The market capitalization of Citicorp stock has risen to $46.5 billion this year as its stock price has risen 53%, vastly outperforming the bull market and most other bank stocks. This boom has given the bank a great deal of capital to deploy, said Mr. Duffy of Keefe Bruyette & Woods.

"Mutual funds are the most highly valued sector of asset management," said Peter L. Bain, managing principal at Berkshire Capital Corp. "And Citicorp has had a wonderful last five years."

A spokesman for Citicorp would not comment on the banking company's expansion plans. He reiterated that Mr. Reed had touched on the topic at the company's annual meeting when he said it had looked at an asset management deal but found prices too high.

Last week, news of the abortive American Express talks hit the market on the heels of a rumor that Citicorp was eyeing T. Rowe Price, a mutual fund company with $60 billion under management.

The price issue was believed to have balked discussions there, too, because the fund company sports a price-to-earnings ratio of 25.67. With Citicorp's at only 13.54, an acquisition of T. Rowe Price could be highly dilutive for the bank's shareholders.

But other mutual fund firms would be less dilutive for Citicorp, observers said. These include Eaton Vance Corp., which deals primarily in bonds and whose price-to-earnings ratio is only 11.26. Or John Nuveen & Co., also a bond firm but one which just expanded into stocks. Nuveen's price-to-earnings ratio is 13.38.

"They have said publicly they are interested in mutual funds and possibly acquiring one," said Raphael Soifer, a banking analyst at Brown Brothers, Harriman & Co. But "they're not likely to do it at current prices."

And what would it take for prices to change? "A stock market crash," Mr. Soifer said.

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