The Associated Press

SEOUL, South Korea - U.S. financial services giant Citigroup has agreed to buy KorAm Bank, South Korea's sixth-largest lender, for up to $2.73 billion in what would be the first such takeover here by a foreign banking company.

The deal announced Monday also marks the largest foreign investment in South Korea's fragile financial sector. It still must gain regulatory approval.

Analysts said the deal would enable Citigroup to expand its consumer banking business in South Korea. It could also boost KorAm's image as Citigroup has a good reputation in South Korea with a local branch posting strong returns in the past several years.

Richard X. Bove, bank analyst with Hoefer & Arnett Inc., said Citi's latest acquisition means "there's no doubt that they see Asia as the important area for growth."

He noted that Citi's purchase of KorAm comes on the heels of Citi's announcement last month that it was joining with Shanghai Pudong Development bank to offer a foreign-branded credit card aimed at the Chinese market.

He said he expected Citigroup to focus on expanding its business from India to Japan, noting that "it's already moving aggressively" in South Korea, India and China.

"Asia has 3 billion people, and there are only 285 million in the United States," Bove noted. "That makes Asia 10 times bigger than the United States, and (their) income is growing faster. All of Citigroup's efforts are going to be put into expanding its position in this area of the world."

Bove also said Citi's interest in Asia means that it's less likely to make major acquisitions in the United States, although he expects the New York bank to compete aggressively for the growing Hispanic market.

Under the agreement announced Monday, Citigroup would acquire a 36.6 percent stake in KorAm currently held by a consortium led by U.S.-based Carlyle Group and JP Morgan Corsair II and offer to buy all remaining shares at a price of 15,500 won ($13.28) per share.

The deal would cost up to 3.18 trillion won, the banks said in a statement.

It would be the first takeover of a Korean bank by a foreign commercial lender.