Citigroup

Citigroup Inc. {{nyse|C}} is one of the largest financial services company in the world. As of 2005 it is the third largest company in terms of market capitalization and the second largest in terms of assets. The formation of Citigroup was announced on April 7, 1998 through a merger of Citicorp and Travelers Group. It was the first US company to combine banking with insurance underwriting since the Great Depression. The company has over 275,000 employees and over 200 million customer accounts in 100 countries.

History

The history of the corporation now known as Citigroup is primarily the history of its Chairman, Sandy Weill, who spun off a consumer finance company known as Commercial Credit from Control Data Systems, and used it to begin assembling a gigantic financial conglomerate. Consumer Finance is the business of lending to people with poor credit histories at high interest rates. Some critics have called this "predatory lending" or "loan sharking". After acquiring some small consumer finance companies, Commercial Credit acquired the much larger Primerica, and adopted the more well known Primerica name for the holding company.

Related Topics:
Sandy Weill - Consumer finance - Control Data Systems - Loan sharking - Primerica

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Primerica was a conglomerate patterned after General Electric by the famous mutual fund manager Gerry Tsai. As GE was doing at the time, Tsai was trying to position Primerica heavily into the financial services realm, acquiring A L Williams, a controversial MLM insurance agency company, and Smith Barney, a large stock broker. He bought Smith Barney at the height of a bull market, and the resulting stock market crash put a tremendous strain on the overall company, forcing him to sell. Tsai had inserted lucrative golden parachutes into his contract agreements because he knew he was going to have to sell, which made the deal more expensive than Commercial Credit was willing to pay. Weill was eventually convinced to go ahead with the deal because he would then be able to use Primerica's Gulfstream G4 jet, something which the Commercial Credit board of directors was not willing to pay for.

Related Topics:
General Electric - Gerry Tsai - A L Williams - MLM - Smith Barney - Stock broker - Golden parachutes

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Upon acquiring the company in 1988, Weill spun off the non-financial businesses of the conglomerate, and attempted to institute the practice of "cross-selling" (also called "cross-servicing"), which he had used previously at American Express. Instead of the corporation owning a stock brokerage, insurance agency, and consumer finance company and letting them each run essentially separately, Weill was interested in each selling each others' products. For example, the insurance agents could sell Smith Barney mutual funds.

Related Topics:
Cross-selling - Cross-servicing

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During this period Weill became interested in the Travelers Insurance company, which had come to Weill for a cash injection because of losses sustained during Hurricane Andrew. Weill also inserted management into that company to oversee operations and cost cutting. This eventually led to the acquisition of Travelers Insurance.

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The Travelers Insurance acquisition added property and casualty, and life and annuities underwriting capabilities to the group. It also brought along the Travelers red umbrella logo, which Weill applied to all the businesses within the group. During this time Travelers acquired Shearson, which was a large stock brokerage Weill used to run. It then acquired Salomon Brothers, a famous Investment Bank. Weill attempted to negotiate a deal to merge with JP Morgan, but this was rejected because the JP Morgan CEO would have wanted to become CEO of the combined company. Weill was eventually successful at convincing John Reed, the CEO of Citicorp, to merge.

Related Topics:
Salomon Brothers - Investment Bank

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Citicorp

Citicorp was the descendant of City National Bank, founded in New York. It was one of the oldest Banks in the United States, and had the largest international branch presence of any United States headquartered bank. It specialized in large corporate banking, and was one of the largest banks in the United States at the time. The CEO at the time of the merger, John Reed, was instrumental in pushing for the acceptance and use of ATMs, and had seen the company through a financially bleak period when it had many problems with international loans defaulting. Reed had been trying to change the corporate culture of Citicorp, for example by hiring top executives from consumer product companies, not banks. Reed felt that the chance to merge with the Travelers Group would help effect change in this area.

Related Topics:
Citicorp - John Reed - ATMs

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