Citicorp, Travelers make loan pledge Merging companies say $115 billion will go to low-, mid-income people


NEW YORK -- Citicorp and Travelers Group Inc. yesterday promised $115 billion in loans and investment for low- and moderate-income people over the next 10 years -- less than community groups expected -- as part of their proposed $80 billion merger.

The combined company, to be called Citigroup, will sell loans and mortgages to small businesses and consumers and provide loans and grants for community development.

The company, which would be the world's biggest financial institution, also plans to make commercial and home insurance more widely available and provide special pricing to poor and middle-income people.

As a percentage of total assets, Citigroup's pledge is smaller than community reinvestment plans announced recently by other merging banks.

"They can do much better," said Kenneth Thomas, a lecturer in finance at the Wharton School and author of "The CRA Handbook." "We expected a commitment of $200 billion to $400 billion" in loan commitments.

U.S. banks are subject to the Community Reinvestment Act, which requires that loans and other financial services be made available to lower-income communities. The law was passed to stop "red lining," in which some neighborhoods were cut off from banking services.

Last year, Citicorp made $1.2 billion in affordable mortgages to low- and moderate-income areas, $1.9 billion in small business loans, $297 million for community development and $5.1 billion in consumer lending, a bank spokeswoman said.

The Office of the Comptroller of the Currency, in its most recent review two years ago, gave Citicorp's Citibank unit an overall "satisfactory" rating, including an "outstanding" rating for distribution services and community development lending. Mortgage lending was rated "satisfactory."

Travelers, a company with insurance, consumer finance and investment banking units, isn't subject to CRA rules.

While $115 billion is a lot of money, Citigroup's commitment is disappointing, community groups said. Over 10 years, that $11.5 billion a year represents about 1.7 percent of the combined company's total assets of $698 billion. Excluding Travelers' assets, the pledge represents 3.7 percent of Citicorp's $310 billion in assets.

By contrast, Seattle-based Washington Mutual Inc., which acquired Great Western Financial of California last year to become the largest U.S. thrift, said it would lend $75 billion, or 8.6 percent of assets, Thomas said.

San Francisco-based BankAmerica Corp. last year pledged $140 billion in loans and investments, or 5.4 percent. Last month, it agreed to a $60 billion merger with NationsBank Corp. BankAmerica said it plans to honor that commitment after the transaction.

Charlotte, N.C.-based First Union Corp. recently pledged $13 billion in CRA loans to the Philadelphia area as a part of its $19.8 billion purchase of CoreStates Financial Corp., the biggest bank transaction ever completed.

Thomas said expectations of between $200 billion to $400 billion were based on Washington Mutual's example and Citicorp assets.

Citicorp, though, said assets are irrelevant. "CRA was meant to put money back into the communities from which you take deposits," said spokeswoman Susan Weeks.

Citicorp and Travelers said $6 billion of its pledge will be used to finance a Center for Community Development, which will distribute funds to community groups.

Pub Date: 5/05/98

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