Fitch: Washington Mutual Finance on positive watch

Fitch Ratings said it has placed the short- and long-term ratings of Washington Mutual Finance Corp on Rating Watch positive following the announced acquisition by Citigroup Inc.

The watch affects Washington Mutual Finance's A long-term and senior unsecured debt ratings and A- rated subordinated debt shelf, among other ratings.

The entity is expected to be combined with the CitiFinancial branch network, expanding CitiFinancial assets by $4 billion. At Sept. 30, Washington Mutual Finance had short-term debt in the form of commercial paper of $1 billion and senior unsecured debt of about $2.3 billion. This debt will be guaranteed by Citicorp Holdings Inc. and thus debt ratings will be equalized with Citicorp and Citigroup ratings upon consummation of the transaction.

Fitch said the acquisition is consistent with Citigroup's strategy of expanding its consumer franchise within the United States and is expected to be immediately accretive to earnings upon closure in the first quarter of 2004.

Ratings for Citigroup Inc. and Citicorp Holdings Inc. are affirmed given geographic and business line diversity, disciplined risk management, a commitment to maintaining capital at targeted levels, and its strong financial performance.

Citigroup expects future revenue growth from the acquisition by targeting an attractive group within nonprime markets and stronger pricing. Integration risk is low given the expertise previously demonstrated by Citigroup. Both credit quality and consolidated capital ratios are expected to remain within current ranges, Fitch said.

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