Citigroup to Buy Texas Bank for Estimated $750M

Citigroup Inc. (C), the world's largest financial services company, said Tuesday it will acquire First American Bank (search) in the quickly-growing Texas market.

Citigroup will acquire $3.5 billion in assets, 102 new branches and 120,000 new customers, the bank said in a press release.

Terms of the transaction were not disclosed, though Sandler O'Neill analyst Jeff Harte valued the deal at $750 million.

"While this is as a relatively small deal for Citigroup, we preliminarily view the transaction positively," Harte said in a note to clients. "Citigroup now has a respectable presence in Texas upon which it can focus on gaining market share."

Expecting to close the purchase in the first quarter of 2005, Citigroup said the purchase should immediately add to earnings.

Following the acquisition, First American branch locations will be converted to Citibank Financial Centers. First American is a unit of the Adam Corporation/Group (search).

The south western United States is regarded as a growth area for financial services because of changing demographics and an influx of retirees. Texas in particular is attractive because of growing consumer wealth.

Citigroup already has 94 CitiFinancial branches in Texas as well as an auto division, home equity operations and a commercial financing business.

J.P. Morgan Chase & Co. (JPM) became the largest retail bank in Texas with 333 branches after closing its purchase of Bank One Corp. (ONE) in July.