Giant financial services firm Citigroup (NYSE:C) said it would buy Washington Mutual's (NYSE:WM) consumer finance business for $1.25 billion. Washington Mutual Finance's 405 offices span 25 mostly southern states, employ 2,300, and sport $4 billion in assets, making consumer and real estate secured loans and selling insurance.

The move expands Citigroup's consumer finance operations in 65 cities and the key states of Texas, Florida, and California. How key? A company spokesman told The Wall Street Journal that about 15% of new consumer-finance loans occur in the Golden State. Thus, Citigroup goes for the gold.

Astute investors understood why Marge Magner, chairman and CEO of Citigroup's Global Consumer Group, in a prepared statement needed to assert: "Over the past three years, we have raised the bar for professional practices and conduct in the consumer finance industry, gaining the positive recognition of many consumer groups and industry observers alike." This was a nod to Citigroup's year 2000 first entry in this market when it dropped $27 billion on Associate First Capital Corp. In 2002, the buyer paid $215 million -- or 0.8% of the purchase price -- to the Federal Trade Commission for Associates' alleged deceptive practices.

That's at least one reason regulators will be combing the deal. Subject to their approvals, it should close in Q1 2004. Citigroup says the purchase will add to 2004 earnings.

On the back of improved earnings and an increased dividend, Citigroup stock this year has rocketed almost 90% from its $30.79 low close in February to yesterday's $46.74. The company's biggest swallow this year was the $31.8 billion buy of Sears' (NYSE:S) credit card and financial business, which closed two weeks ago.

Washington Mutual says it will use the cash to fund its own storefront retail business growth. Its stock has rewarded investors, rising 277% from a Jan. 2000 five-year low of $12.34 to close yesterday at $46.55, including dividends. Great returns for the bear market, no?

Small caveat: If and when interest rates rise again, we'll see how much historic rate cuts boosted earnings and stock gains.

Smart sale by one, smart buy by the other? Declare your views on our Washington Mutual and Citigroup discussion boards -- the best on the Web and now even spiffier!