NU Online News Service, July 1, 2004, 5:42 p.m. EDT

The Principal Financial Group Inc., Des Moines, Iowa, has completed previously announced plans to sell its 68-year-old mortgage banking unit to Citigroup Inc., New York, for $1.3 billion.[@@]

Principal will end up with $720 million in after-tax net proceeds, the company says.

The company had set a goal of completing the deal by Sept. 30.

Principal Residential reported $29 million in net income for the first quarter on $256 million in revenue. It ended 2003 with 958,000 loans on its books and a total loan principal balance of $119 billion.

Most of the loans are conventional fixed-rate prime mortgages, Citigroup says.

Many companies have been backing away from the mortgage industry because of worries about the effects of rising interest rates on U.S. home sales. Principal started in the mortgage lending business in 1936, but it now says it wants to focus on selling retirement plans and employee benefits to small and midsize companies.

In related news, Principal has filed a shelf registration with the U.S. Securities and Exchange Commission that will permit it to issue up to $3 billion in securities.