Rumors that Citigroup Inc. would pull the plug on Citi f/i apparently are pulling down expectations for S1 Corp., the technology company that supports the Internet-only banking service.

Citigroup confirmed late Friday afternoon that it would roll Citi f/i into its long-standing Direct Access online banking service. A spokesman for Citi declined to discuss the future of its relationship with S1.

The buzz surrounding the issue seems to have contributed to analysts' recent downgrades and lowered revenue expectations. Shares of Atlanta-based S1 fell 27% last week, closing Friday at $20.50.

Scott Appleby, a stock analyst at Robertson Stephens in San Francisco, said in a research note, "Management turmoil at Citibank has led to speculation regarding the company's Internet strategy and conjecture that S1 Corp.'s historically strong relationship [with Citigroup] may be in jeopardy."

A Wall Street analyst speaking on condition of anonymity said, "S1 runs Citi f/i for Citibank, so there is a chance they will probably lose that customer."

Robert Stockwell, S1's chief financial officer, declined to comment.

Citi was one of six prominent financial companies that in 1997 invested a total of $14 million in Security First Network Bank in Atlanta, the Internet bank that spun off the technology unit that ultimately became S1.

Losing Citibank's business would be another blow to S1. In recent months Huntington Bancshares and Wachovia Corp., both of which are S1 clients and investors, signed licenses with Beaverton, Ore.-based Corillian, a main S1 rival. Both banks plan to move all of their online banking operations from an S1 to a Corillian platform. Hughes Aircraft Credit Union, the nation's 11th-largest credit union, also recently left S1 for Corillian.

S1 also is facing a dozen class actions filed in response to a steep drop in its stock price and changes in the way it recognizes revenues.

Mr. Appleby's research note said the loss of Citi would have a minor impact on S1's revenues - about 2% to 3% of revenues this year 2000 and 3% to 5% in 2001. Robertson Stephens lowered its 2000 revenue expectations for S1 to $260 million, from $278 million.

In a dramatic move, Charles Wittmann, an equity analyst at First Union, cut S1's stock-price target to $35 a share, from $150. He also lowered his rating from "strong buy" to "buy" and cut his fiscal 2000 and 2001 revenue estimates.

Adams Harkness Hill, an investment bank in Boston, lowered its rating on S1 from "strong buy" to "accumulate."

Christopher Musto, director of financial services at Gomez Advisors in Concord, Mass., said his firm estimated that Citi f/i, which was started in August 1999, had 30,000 customers at yearend. That compares to Gomez's yearend 1999 estimates of 70,000 at e-Trade Group Inc. (formerly Telebank); 60,000 at WingspanBank.com, Bank One's Internet-only entry; 40,000 at Netbank; and 30,000 each for Security First Network Bank and American Express Membership Banking.

"Internet-only banks have not made a dent" in traditional banks, Mr. Musto said. "Branch banking is alive and well."

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