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.

Post merger history

In order to convince Citicorp to merge, Weill proposed a structure of co-CEO's, consisting of himself and John Reed. This strategy was denounced immediately by many in the press and many research analysts as being unworkable. Former Treasury Secretary Robert Rubin was brought in as a moderating influence between Weill and Reed, but conflicts within the company eventually led to Reed being forced out (though Rubin remains). In addition, three co-CEO's (Jamie Dimon and Deryck Maughnan from Travelers, and Victor Menzes from Citicorp) were placed in charge of the corporate and investment bank, while two co-CEO's were placed in charge of the consumer group. This was dubbed "The Noah's ark school of management" by the press, and did not last long.

Related Topics:
Treasury Secretary - Robert Rubin

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The Traveler's management attempted to implement its culture of cost cutting and cross selling into Citigroup. Citibank retail bankers were instructed to get securities and insurance licensed to sell mutual funds and annuities. US retail banking however, never became a major focus for the company. Todd Thompson, CFO, explained that "the retail branches are mostly a deposit gathering operation used to fund other, higher return, areas". At present time, its different consumer divisions are not as integrated as other financial institutions, with each one primarily running as a stand-alone monoline.

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The corporate and investment had a more difficult time integrating. There was infighting between corporate bankers and investment bankers, as to who would be the primary relationship point of contact with a customer. Conflicts between the tri-CEO's (including a drunken skirmish between Dimon and Maugnan at a company retreat) lead to the ouster of Jamie Dimon.

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The company soon acquired Associates First Capital, the largest consumer finance company, and Banamex, the largest bank in Mexico. This was controversial in Mexico, at the time the press there were worried that Mexico's largest banks would all become "branch offices for foreign competitors". Bombs exploded in branches in protest.

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The company spun off its Travelers Property and Casualty insurance underwriting business because it caused a drag on the Citigroup stock price due to its earnings being more seasonal and vulnerable to large disasters. It was also difficult to sell this kind of insurance directly to customers since most industrial customers are accustomed to purchasing insurance through a broker. Citigroup retained the life insurance and annuities underwriting business. However by 2005, Citigroup decided to sell its life insurance underwriting division to MetLife for the same reasons. Citigroup still heavily sells all forms of insurance, but it no longer manufactures (i.e. underwrites) insurance. Citigroup does today, however, retain Travelers' signature red umbrella logo as its own.

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