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Rating Action:

MOODY'S PLACES RATINGS OF TRAVELERS GROUP INC. AND CITICORP (SENIOR DEBT AT Aa3 FOR BOTH FIRMS) ON REVIEW FOR POSSIBLE UPGRADE FOLLOWING ANNOUNCEMENT OF AGREEMENT TO MERGE; RATINGS OF SUBSIDIARIES ALSO AFFECTED

06 Apr 1998
MOODY'S PLACES RATINGS OF TRAVELERS GROUP INC. AND CITICORP (SENIOR DEBT AT Aa3 FOR BOTH FIRMS) ON REVIEW FOR POSSIBLE UPGRADE FOLLOWING ANNOUNCEMENT OF AGREEMENT TO MERGE; RATINGS OF SUBSIDIARIES ALSO AFFECTED New York, 04-06-98 -- Moody's Investors Service has placed on review for possible upgrade the ratings of Travelers Group Inc. (senior debt at Aa3) and Citicorp (senior debt also at Aa3), following the firms' joint announcement today of an agreement to merge in a stock-for-stock transaction valued at approximately $140 billion. Ratings for Salomon Smith Barney Holdings Inc. (senior at A2), are also on review for possible upgrade. Ratings of other subsidiaries are also affected. The merger would make the combined organization, to be renamed Citigroup Inc., among the largest financial services firms in the world, with pro-forma assets of over $700 billion, net revenues of nearly $50 billion, operating income of approximately $7.5 billion, and shareholders' equity of more than $44 billion.
Moody's review will focus on benefits related to the increased diversity of earnings for the combined organization and the extent to which this combination enhances the potential for expansion of the firm's products at both the retail and wholesale level, throughout the world. Furthermore, Moody's noted that the combined firm will face material integration issues, given the sheer size and complexity of each entity, but that the complementary nature of Travelers' and Citicorp's products, distribution channels, and geographic reach should help to mitigate these challenges.
Moody's noted that Travelers enjoys strong competitive positions and brand name recognition in each of its major business segments, and has been characterized by disciplined financial and operational management. The group also benefits from its diversified earnings sources and sound capitalization. These strengths are tempered somewhat by potential earnings volatility and heightened leverage at the securities brokerage and investment banking operations related to the recent acquisition of Salomon Inc. -- which is still in the process of integration -- and by intense competitive conditions and exposures in property and casualty insurance.
Citicorp (CCI), in turn, has a unique and balanced mix of global consumer and corporate banking businesses; these strong franchises have generated high levels of core profits. CCI also has very good asset quality and capital levels, improved reserves, and disciplined approaches to risk management, capital management, and corporate development initiatives. CCI's consumer and corporate banking businesses in emerging markets contribute approximately half of Citicorp's profits and most of its earnings growth. These operations are a potential source of earnings volatility, but they also generate strong returns. The potential risk associated with such businesses is mitigated to some extent by the broad geographic diversity of these businesses. The company has shown a relatively low risk appetite, and much of the corporate banking business in these markets is not credit-related.

Ratings placed on review for possible upgrade include the following:
Travelers Group Inc. - senior debt at Aa3, preferred stock at "aa3";
Travelers Capital Trusts - trust preferred securities at "aa3";
Salomon Smith Barney Holdings Inc. - senior debt at A2, subordinated debt at A3, counterparty rating at A2;
Commercial Credit Company - senior debt at A1;
Citicorp - senior debt at Aa3, subordinated debt at A1, and preferred stock at "aa3"/"a1".

Ratings confirmed with positive outlooks include the following:
Travelers Property Casualty Corp. - senior debt at A1;
Travelers P&C Capital Trusts - trust preferred securities at "a1" ;
Travelers Insurance Company - insurance financial strength at Aa3;
Travelers Property Casualty Group (intercompany pool) - insurance financial strength at Aa3;
Travelers Casualty and Surety Company of America - insurance financial strength at Aa3;
Primerica Life Insurance Company - insurance financial strength at Aa3.

Other ratings confirmed with stable outlooks include the following:
Travelers Group Inc. - rating for commercial paper at Prime-1;
Commercial Credit Company - rating for commercial paper at Prime-1;
Travelers Insurance Company - rating for commercial paper at Prime-1;
Citibank, N.A. - bank deposits at Aa2/P-1, financial strength rating at B+, counterparty rating at Aa2 (outlooks revised to stable from negative);
Salomon Smith Barney Holdings Inc. - rating for commercial paper at Prime-1;
Smith Barney Inc. - rating for commercial paper at Prime-1.

Citicorp is the parent company of Citibank, which serves consumer and corporate customers from locations in nearly 100 countries around the world. Its Global Consumer Business is the world's largest issuer of credit cards with some 60 million bank cards and it provides financial services through more than a thousand Citibank branches located in over 40 countries.
Travelers Group is a diversified financial services conpany engaged in investment services, asset management, life insurance and property casualty insurance and consumer lending. Its operating companies include Salomon Smith Barney, Salomon Smith Barney Asset Management, Travelers Life & Annuity, Primerica Financial Services, Travelers Property Casualty Corp. and Commercial Credit.

No Related Data.
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