Later this year, Citicorp will open three branches in Connecticut, marking the company's first interstate expansion since the late 1980s.
The move is symbolic of Citicorp's rebounding health, and indicates that the nation's biggest bank can once again entertain thoughts of expansion. But how easily it will be able to do that remains to be seen.
Citicorp continues to operate under a memorandum of understanding with federal regulators. That means it must consult with regulators on Operational issues, including significant acquisitions or other forms of expansion.
So while the company is finally seeing a real diminution in credit problems and is reaping profits from its core businesses, it could be a long time before it returns to the acquisition trail.
Regulators Want Proof
"For the Fed to be receptive to any deal, it has to be convinced that for a period of time, things have really turned around and that a bank's asset problems are under control," said one Washington attorney who requested anonymity. "Regulators always believe that has occurred more slowly than management does."
In the meantime, watchers of Citicorp and of its regulators say the company is likely to continue to expand in a slow, steady manner. The behemoth is expected to prowl markets contiguous those in which it already operates, looking for individual branches to fill in its far-flung franchise.
"If Citi wanted to pick up a branch or two they would probably be able to do it," said another Washington lawyer. "But that is different from doing a major acquisition of a major bank."
Sure Sign of Strength
When will Citi be allowed to do a big deal? Banking lawyers say one sign to look for is the restoration of a common share dividend, which was suspended in October 1991. Often when regulators allow a banking company to pay its shareholders, they are ready to begin approving, other transactions.
Citicorp chairman and chief executive officer John S. Reed told investment managers at a recent conference in New York that it is more likely Citi will "actively" discuss reinstating its dividend sometime in the first or second quarter of 1994 than during 1993.
Some analysts say that for Citicorp, the inability to do a big deal is not a problem. True, many of the nation's largest banking companies are said to be scouring the Northeast in search of acquisition targets. But Citicorp is an international institution that is becoming less reliant on domestic operations.
"The highest return opportunities are outside of the U.S.," said Diane Glossman, an analyst at Salomon Brothers Inc. "And their expansion plans there have not been hampered by any regulatory hindrances."
In 1992, for example, Citicorp opened four new branches in Japan. During that same year, the company's Latin American, Middle Eastern, and Asian businesses accounted for slightly more than half of its consumer income.
"I would be surprised if traditional bank expansion was a major priority for them," added Raphael Soifer, an analyst at Brown Brothers Harriman & Co.
Citicorp's need for additional brick and mortar is not pressing. The bank already boasts a relationship with one of every four U.S. households, thanks to its massive credit card operation.
Furthermore, Mr. Soifer said, traditional, bank acquisitions often work best for institutions with big middle-market businesses, while Citicorp remains focused on worldwide consumer and high-end corporate banking.
Still, some observers note that Citicorp is likely to float some trial balloons by running potential acquisitions by its regulators. And no one can say for certain that all of them would be rejected.
"In my experience with [undercapitalized banks], when opportunities came up that were important to them, under the right circumstances, regulators let them do it," one lawyer said.