Citigroup is moving forcefully into the lower end of consumer lending.

In three deals this month, the financial services powerhouse has shown a hearty appetite for the kind of lending business that had been favored by Travelers Corp. Citicorp, which merged with Travelers last year, had specialized in a more upscale clientele.

This month Citigroup bought the Chilean finance company Financiero Atlas and announced a deal to buy more than 100 branches from Associates First Capital Corp. of Irving, Tex.

The latest deal, for Farmington Hills, Mich.-based Source One Mortgage Corp., which is valued at $380 million, further differentiated the new company from the old Citicorp, which had shied away from the mortgage business after experiencing credit quality problems in the 1980s.

Together, the deals signal a solid commitment to a business where many banks have stumbled: subprime lending. BankAmerica Corp., for example, sold off the finance company Security Pacific Financial in pieces after owning the unit for only five years.

Other banks, including KeyCorp and First Union Corp., have been criticized for paying high prices for companies that cater to customers with poor credit.

Robert B. Willumstad, Citigroup's head of global consumer lending says the combined company will benefit from Travelers' years of experience.

As the one-time head of Travelers' consumer finance subsidiary, Commercial Credit, Mr. Willumstad is one of Citigroup's most vocal advocates of lending to consumers from all income and credit categories.

"I don't put us in the same category as other banks," he said. Travelers has been serving the lower income population for years through Commercial Credit and Primerica Financial Services, he said.

Mr. Willumstad said he's seen firsthand what not to do. While heading Commercial Credit, he bought three finance units from banks who did not properly manage the business.

"Banks have traditionally had trouble in this marketplace because they superimpose bank-like credit procedures on that business, and it doesn't work," Mr. Willumstad said.

"At Commercial Credit we have risk-based pricing, while banks have traditionally had one-size-fits-all," Mr. Willumstad said. "Some of us have been in that marketplace for 10 or 15 years and we have a good track record there."

He's unfazed by the nonbank competitors like Conseco Inc. and Household International that have said their exclusive focus on the low- to mid- income customer will give them an edge over commercial banks.

Those companies "have nowhere near the distribution channels or access to customers that Citigroup has," Mr. Willumstad said. "In fact, it's hard for me to imagine that there's a financial services company in the country that has the ability to reach as many customers as Citigroup does."

Citigroup's sheer size may give make give the company some short-term competitive disadvantages in the fast-moving subprime sector, analysts say.

"Citigroup, with its multiple lines of business and competing interests, may have a more difficult time reacting to immediate market opportunities," said Michael McMahon, an analyst with Sandler O'Neill & Partners. "But over the long term, the bank will do just fine" in the sector.

Citigroup may also face criticism from a growing number of consumer advocates and regulators who are closely watching banks' increasing participation in the subprime sector.

Several bank regulators, including the Office of Thrift Supervision and the Federal Deposit Insurance Corp., recently issued a statement of guidance to banks participating in the business that advised them to be wary of the hazards of the business.

Meanwhile, fair-lending advocates vowed at a mid-March community reinvestment conference to fight predatory tactics by bank subprime lenders.

Citigroup's deal for Source One, a VA and FHA program lender, also signals the company's renewed interest in the mortgage market. While other big banks actively added to or shed mortgage portfolios and retail offices, Citibank had sat on the sidelines.

Both the president and capital markets chief of Citibank Mortgage resigned last March, after chief executive John Reed publicly downplayed Citibank's interest in acquisitions in the sector. Citibank was a big player in the home loan market in the 1980s, until the bank ran into credit quality problems and scaled back.

Mr. Willumstad said that the Source One deal should not be taken as a sign that Citigroup's goal is to be the "biggest mortgage company in the U.S.," but added, "we intend to be a real player in the market.'

The deal presents some big-bank overlap. Chase Manhattan Corp. purchased a $19.3 billion loan portfolio from Source One in 1997 and continues to use the mortgage company as a subservicer, a Chase spokeswoman said.

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