Associates First Capital Corp.'s decision to shed 128 U.S. consumer finance branches presented an attractive opportunity to Citigroup's expansion-minded Commercial Credit unit.

Commercial Credit "had already intended to open some new branches de novo this year," a Citigroup spokeswoman said. "When this opportunity came along it was a more cost-efficient way to open new locations."

The sale agreement, announced Monday, gives Baltimore-based Commercial Credit earnings from day one, an instant customer base, and 536 well- trained employees, she said.

The branches are in 30 states, stretching from California to New York. The purchase will bring Commercial Credit's branches to more than 1,100, the Citigroup spokeswoman said.

Associates, the largest consumer finance company in the United States, got the branches it is now selling in its recent purchase of Avco Financial Corp. from Textron Inc. for $3.9 billion.

When that deal closed on Jan. 7, Associates said it would slash 400 jobs from Avco's work force, mostly in its Costa Mesa, Calif. headquarters.

Associates' decision to sell 128 of Avco's 1,265 branches was another part of the integration plan. The selection of those branches was based on factors including performance, the number of branches in each state, and their proximity to each other, a spokesman said.

Commercial Credit is considered a success story in financial services cross-selling, having used the door-to-door agents of another Travelers unit, Primerica Financial Services, to sell its products. In 1997, Commercial Credit purchased Security Pacific Financial Services from Bank- America.

Banks and large, well-capitalized finance companies like Associates are expected to pick up market share in home equity lending as smaller lenders that until recently dominated the business go belly up.

"There's a big opportunity right now," said David Olson, head of David Olson Research in Columbia, Md. "You have a fairly large industry going through major changes, and the leaders are all dying. It's a good opportunity to come in at cheap prices and a rational cost structure and not make the mistakes of those who died."

The specialty finance industry was thrown into turmoil last year by unexpected loan prepayments and volatile capital markets in the fourth quarter. Companies that had relied on the asset-backed securities market to sell their loans found that they could no longer securitize profitably.

Associates, by contrast, did not rely on securitization, and was very conservative in its accounting, Mr. Olson said.

The real test of Citigroup's interest in the subprime and home equity sectors will be what it does with IMC Mortgage Corp., Mr. Olson added. Last month IMC said that Greenwich Street Partners II, a Citigroup-owned fund, would merge it into a subsidiary.

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