Citigroup rules out acquisition of rival investment bank

Citigroup, the world's largest bank, has ruled out buying another investment bank in Europe even if the continued downturn in mergers and acquisition throws up a bargain later this year.

The US company bought the investment banking arm of Schroders, the fund management group, in 2000 to create Schroder Salomon Smith Barney (SSSB). It is often rumoured to be shopping for a further deal to increase its share of the European mergers and acquisitions market, with speculation recently pointing to Credit Suisse First Boston as a likely victim.

But this weekend Sir Win Bischoff, Citigroup's European chairman, said the company was more interested in consumer banking acquisitions in Europe, even if rival investment banks were put in play amid a continued dearth of corporate activity. While SSSB, which has 10,000 staff, is ranked number five worldwide in mergers and acquisitions, it comes only ninth in the European league tables.

"The leitmotif of this organisation is to have a higher return on capital. Whether we can do that as well as [buy another investment bank] is questionable," Sir Win said. "I wouldn't hold your breath for [such] an acquisition."

Edward Miller, SSSB's co-chief executive, said the firm was relatively weak when it came to advising on deals exceeding $10bn, but that did not mean it intended to buy a rival. "We already have relationships with a lot of big companies. It is just a matter of time before they feed through," he said.

Sir Win said Citigroup would prefer to acquire divisions of retail banks, in particular a portfolio of credit card customers. Globally, about 50 per cent of the company's business is derived from consumer banking, with 40 per cent from corporate and investment banking and 10 per cent from asset management.