Citigroup Plan Under Long Review by Fed

Citicorp and Travelers Group Inc. executives, who once hoped for quick approval of the $73.1-billion merger they announced April 6, will have to wait a while longer for federal approval.

An examination of correspondence between the companies and the Federal Reserve Board shows the Fed is in the middle of a detailed review of issues raised by the proposed combination, a review that still has some time to run. What’s more, the Fed isn’t likely to act until it sees what Congress will do with legislation that would overhaul U.S. banking laws and make the merger easier to complete, analysts said.

“They wouldn’t do it before Congress acted,” said banking analyst Diane Casey.

A review of correspondence found no reason to doubt that the merger will ultimately be approved, though probably with conditions. “The risks of the Fed not approving are quite low,” said David Berry, director of research at Keefe, Bruyette & Woods.

The delay in approval, however, means Citicorp and Travelers can’t complete the deal and combine forces as soon as they had hoped--and can’t reap the benefits of higher revenue from increased sales by selling insurance, credit cards and other products to each other’s customer base.

The merger would create a company with more than 100 million customers in 100 countries and businesses ranging from commercial banking to insurance, mutual funds, securities lending and investment banking. Travelers owns Salomon Smith Barney Inc., one of the biggest U.S. investment banks.

The Fed has pressed Citicorp and Travelers to explain how any cross-marketing arrangements could impede a possible Fed-ordered divestiture of the insurance business. Citicorp and Travelers do not want to divest the insurance business and are hoping Congress will change the law to allow them to keep the businesses in the new Citigroup.