Citicorp Eyes Foreign Sales, Analysts Say

LONDON -- In its quest to raise capital, Citicorp is likely to sell some of its holdings in various banking and financial companies around the world, analysts predict.

The holdings, estimated to be worth at least $1 billion, are a legacy of Citicorp's global empire-building. They include dozens of minority interests and joint ventures that analysts call the money-center company's "hidden franchise."

These links range from banks and companies in Canada, Mexico, Brazil, Australia, and Asia to a 40% stake in the Saudi American Bank, which analysts cited as especially attractive.

The Heirlooms Are Safe

"It makes sense to sell noncore operations and underperforming, capital-intensive units, as the bank itself has indicated, and we're not talking about hocking the heirloom jewelry," said Tanya Azarchs, analyst at Standard & Poor's Corp.

A Citicorp spokeswoman said the company "remains committed to its global network, though we are looking at nonstrategic sales." She declined to discuss the identity of any divestment target.

But analysts and bankers said the potentially most profitable affiliate divestment for Citicorp could come from the $7.4 billion-asset Saudi American Bank.

Mardig Haladjian, analyst at Capital Intelligence, a Middle East credit rating agency, described Saudi American as the "best bank with the best client base in Saudi Arabia, a real gem."

"If I were Citicorp, I would not accept anything less than than $300 million for the stake, and it could go much higher - there would be no shortage of buyers," the analyst said. He estimated its value at a minimum of $230 million, based on Saudi American's net worth of $580 million.

Mr. Haladjian noted industry speculation that Prince Waleed bin Talal, the Saudi Arabian royal family member who bought $590 million of Citicorp preferred stock this year, is interested in a deal for Citicorp's stake in Saudi American.

Prince Waleed is chairman of and the biggest single stockholder in United Saudi Commercial Bank, and such an acquisition would notably strengthen his presence in the oil kingdom's financial industry, Mr. Haladjian said.

Analysts contended that divestment by Citicorp of these types of affiliations would go some way toward closing the estimated $800 million to $1 billion gap in its compliance with capital adequacy ratios of the Bank for International Settlements.

Ms. Azarchs of S&P said divestments would "work both sides of the capital ratios" for Citicorp. "It reduces assets against which capital must be held and at the same time raises cash to add to capital."

In the recently agreed-to sale of its Citibank Italia SPA unit, Citicorp is to gain the equivalent of $125 million - both from the proceeds and the capital benefit of removing the Italian operation's $1.8 billion in assets from its balance sheet.

Citicorp has reported that earnings from "unconsolidated subsidiaries" in the first nine months of 1991 totaled $105 million, versus $101 million in the same period of 1990.

Those data suggest at least $1 billion in possible divestment proceeds. This is based on an industry pricing yardstick that uses a multiple of 10 times underlying earnings streams, not counting premiums for particularly valuable holdings.

In turn, every $1 billion in loans divested reduces a bank's capital needs by $80 million under the BIS ratio, assuming those assets are 100% risk-weighted.

Protecting Long-Term Strategy

Analysts said any divestment would undoubtedly be chosen carefully by Citicorp so as not to damage its long-term strategic aims in international banking. For example, they cited the company's purchase last month of outstanding stock in Colombia's Banco Internacional for $22.4 million, restoring its ownership stake to 100%.

The reacquisition was linked by analysts to strong earnings from commercial and consumer lending Citicorp has enjoyed in Latin America.

This approach is central to the strategy of chairman John Reed, who has vehemently denied that Citicorp's key overseas consumer banking network in Germany could be for sale despite a rumored sticker price of $1 billion for the unit.

The German operation, Kunden Kredit Bank, is the "most valuable part of the consumer business in Europe," Mr. Reed said in remarks released by Citicorp in Germany.

Among other sizable affiliations, Citicorp owns 40% of $350 million-asset CityTrust Banking of the Philippines and of Arrendadora SA of Mexico, as well as the stakes given in parentheses for the following companies:

Banco Cresiful de Investimento of Brazil (49.9%), CitiNational Ltd. of Australia (49%), First Citicorp Leasing Inc. of Korea (50%), Taiwan First Investment & Trust Co. (40%), and Nigerian International Bank (40%).

Ms. Azarchs of S&P said Citicorp's holdings in Asia are attractive because "very high multiples" can be obtained for banking and finance companies in the region.

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