Fitch Aff Citigroup & Banamex; California Commerce On Watch Pos.

Business Editors

NEW YORK--(BUSINESS WIRE)--May 17, 2001

Fitch has affirmed the ratings for Citigroup and its commercial bank related subsidiaries.

The ratings for Grupo Financiero Banamex Accival (Banacci) and its Mexico and Argentina based subsidiaries have also been affirmed with the exceptions of the `AA' national long-term and `B/C' intra-country issuer ratings for Banco Nacional de Mexico (Banamex) and the `BBB' national long-term rating for Banco Bansud SA, which were placed on Rating Watch Positive. Also, Fitch has placed all the ratings of Banamex's US bank subsidiary, California Commerce Bank, on Rating Watch Positive. The rating actions are in response to today's announcement that Citigroup has entered into a definitive agreement to acquire Banacci. The purchase price of $12.5 billion will be split evenly between cash and Citigroup common shares. Citigroup will account for the transaction as a purchase and will recognize approximately $8 billion of total intangible assets. Banacci will be held as a subsidiary of Citibank Overseas Corporation (COIC). COIC is a wholly owned subsidiary of Citibank, NA and is the legal vehicle used to hold the majority of Citibank's operations outside the United States. The purchase, which will require regulatory approval, is expected to close in the fourth quarter of this year. A complete list of affected ratings is included below.

The affirmation of the Citigroup ratings reflects the fact that Fitch views the transaction as being highly consistent with Citigroup's strategic objective of becoming a dominant global financial services franchise. The addition of the Banamex franchise will result in Citigroup possessing the top market share in Mexico in key financial products and services as well as having the most extensive physical presence throughout the country. The heightened risk associated with increased exposure in a non-investment grade country is tempered both by Banamex's recent track record in delivering profits while continuing to enhance the effectiveness of risk management systems and Citigroup's proven experience in navigating a prudent course in numerous emerging markets, including Mexico. Fitch is comforted that the integration effort should not be distracted by the need to restate financial positions or recognize hidden asset quality problems as Banamex has appropriately responded to asset quality erosion in the market via aggressive reserve building.

Further, the acquisition results in minimal erosion in Citigroup's key financial measures. While capital ratios will come under some pressure, pro forma levels remain appropriate for the ratings assigned to Citigroup and its commercial banking related subsidiaries. Fitch anticipates that a meaningful level cost savings will be obtainable based on the opportunities offered by the integration of Banamex with Citigroup's existing operations in Mexico and the likelihood that the association with Citigroup should allow Banamex to lower its cost of funding. While revenue growth was available to both franchises on a stand-alone basis, the combined company should have superior resources to tap opportunities in traditional commercial bank products as well as developing prospects in asset management and insurance.

The affirmed ratings for Banacci and its subsidiaries reflect the constraints of the sovereign ratings assigned to Mexico and Argentina for Banco Bansud. The lack of immediate plans by Citigroup to enhance the financial profile of Banacci or its subsidiaries through capital infusions or other direct financial support, resulted in the Individual ratings being affirmed. Banacci's individual rating remains on Rating Watch Positive with the expectation that it will be upgraded to the level of its primary bank subsidiary Banamex. The placement of Banamex's national long-term rating and intra-country issuer rating and Banco Bansud's national long-term rating on Rating Watch Positive is reflective of the additional support provided by the ownership of Citigroup.

The assignment of Rating Watch Positive to the ratings for California Commerce Bank incorporates the view that the affiliation of California Commerce with Citigroup allows the US regulators to look directly to Citigroup for support of its new US affiliate. The ultimate resolution of the Rating Watch status for California Commerce will be greatly influenced by Fitch's ongoing assessment of the pertinent regulatory and legislative issues that apply to this rather unique arrangement.

Ratings Placed on Rating Watch Positive:

Banco Nacional de Mexico
--National long-term `AA';
--Intra-country issuer rating `B/C'.

California Commerce Bank
--Long-term senior `BBB-`;
--Long-term deposits `BBB';
--Subordinated debt `BB+';
--Short-term `F2';
--Short-term deposits `F2';
--Individual `B/C';
--Support `4'.

Banco Bansud SA
--National long-term `BBB'.

Ratings Affirmed:

Grupo Financiero Banamex Accival
--Long-term `BB+';
--Short-term `B';
--Individual `D' (Rating Watch Positive);
--Rating Outlook Stable.

Banco Nacional de Mexico
--Long-term `BB+';
--Short-term `B';
--Long-term local currency `BBB';
--Short-term local currency `F2';
--National short-term rating `F1+';
--Individual `C/D';
--Support `2T';
--Rating Outlook Positive.

Banco Bansud SA
--Individual `D/E';
--Support `4T'.

Citigroup
--Long-term senior `AA';
--Subordinated debt `AA-`;
--Preferred stock `AA-`;
--Short-term/commercial paper `F1+';
--Individual `A/B';
--Support `5';
--Rating Outlook Stable.

Citicorp
--Long-term senior `AA';
--Subordinated debt `AA-`;
--Short-term/commercial paper `F1+';
--Individual `A/B';
--Support `5';
--Rating Outlook Stable.

Citibank, NA
--Long-term senior `AA';
--Long-term deposits `AA';
--Subordinated debt `AA-`;
--Short-term/commercial paper `F1+';
--Short-term deposits `F1+';
--Individual `A/B';
--Support `1';
--Rating Outlook Stable.