Citigroup is one of the world’s foremost financial services corporations, offering products and services to clients worldwide. Over its long history, Citigroup has managed to thrive through economic ups and downs as well as technological revolutions to expand globally.
Retail Banking Business. American Bank offers individual consumers comprehensive financial services to assist them in meeting their goals. In addition, its private label credit card division issues cards for companies like American Airlines, Best Buy and Costco.
Origins
Citicorp and Travelers joined forces in 1998 under the promise that it would offer customers unparalleled convenience with one-stop banking, securities, and insurance services. Furthermore, supporters claimed a more broadly diversified company would better be able to withstand financial shocks than an undiversified one; unfortunately however, Citigroup’s exposure to troubled mortgages in collateralized debt obligations (CDOs), combined with poor risk management practices eventually caused its demise in 2007.
Citigroup emerged from its merger as an industry powerhouse, boasting assets worth $698 billion and being called by The Economist “a global financial supermarket”. John Reed of Citicorp and Sanford Weill from Travelers Group agreed to co-manage their combined company.
Citibank was an early pioneer of automated teller machines (ATMs) in 1976 and pioneered credit cards that offered revolving credit, photo identification, and risk-adjusted pricing. By late 1979, they also ventured into leasing and brokerage business by purchasing Salomon Smith Barney brokerage firm.
By the 1980s, Citibank had become one of the premier American banking companies and credit card issuers worldwide. Citibank forged an early alliance with ABN AMRO, the Dutch bank, to form a global credit card network and was also among the first American banks to offer an international consumer banking service; offering depositing and withdrawing money, checking accounts and wire transfers in over 90 countries around the globe.
Citigroup saw rapid expansion during the ’80s and ’90s as it continued its global financial services business expansion. In 1987, Citibank purchased British credit card company Sears Roebuck & Co.; two years later it introduced an innovative negotiable certificate of deposit called Citibank CD which offered higher interest rates than traditional certificates of deposit.
Citibank expanded its international footprint during the early 1990s with the acquisition of European American Bank from ABN AMRO and Travelers Property Casualty Corporation. Citibank kept the red umbrella logo associated with Travelers Insurance while spinning off property and casualty business into Travelers Companies Inc.
Mergers & Acquisitions
Citicorp made several strategic acquisitions between 1980 and 1993 to expand its presence in consumer banking, investment banking and insurance services. Notable among them were Fidelity Savings Association of San Francisco; First Federal Savings of Chicago; and New Biscayne Savings and Loan Association of Florida – each greatly increasing Citicorp’s interstate presence while better positioning them to compete with larger national banks.
Citicorp made its most noteworthy move in 1998 when they merged with Travelers Group Inc, creating one of the first global financial services supermarkets and giving Citicorp access to offering mortgages, consumer loans, securities trading services and investment advisory services for customers.
Citigroup’s growth did not come without risk; heavy exposure to subprime mortgages was one of the main contributors to 2008 financial crisis, while management structure became too cumbersome and top executives focused too much on short-term goals rather than long-term ones.
Citigroup announced plans for a major restructuring to save costs and streamline their organization, with 13 levels of management being eliminated and the overall headcount decreased by 31,000 employees. Furthermore, Citigroup stated its intent to limit third-party service providers for card transactions processing as well as other activities that contribute to backend processing services being relied upon less often by them.
Citigroup remains focused on the implementation of its changes, yet still faces numerous obstacles going forward. These include finding expense savings and closing its remaining international consumer market exits; further increases in interest rates; geopolitical uncertainty and potential regulatory, compliance or other requirements and costs that arise; among many others.
Citigroup possesses both the resources and expertise to overcome these hurdles and continue its growth. Its strong brand name, extensive global network, innovative approach to consumer banking services and innovative approach have already proven their worth; should Citi continue executing on its strategy while prioritizing revenue over profits it has an excellent chance at remaining the number one bank holding company for years.
Growth & Expansion
Citicorp made impressive gains during the 1980s and 90s, expanding globally while remaining an industry leader. Citi’s rapid expansion allowed it to dominate banking not only within its home country of the US, but globally as well. Now boasting over 3,000 offices around the world and internationally recognized for retail banking, investment banking, credit card services and international banking; yet its size does not make it unresponsive; rather its innovative approach distinguishes it as an industry pioneer.
Citicorp took a giant leap forward in 1998 by merging with Travelers Group to form one of the world’s biggest financial firms: Citigroup Inc. This entity held assets exceeding $698 billion. Citigroup not only served as banking company in the world, but was also known for investment banking expertise and had an impressive collection of credit cards. Sanford Weill of Travelers had long worked to transform Citicorp into global finance powerhouse.
Citigroup was not without its difficulties during this merger; in 2000 alone it was required to set aside $3 billion as reserves against loan losses in Brazil and other developing nations, and face allegations of predatory marketing practices at Associates unit, leading eventually to a $240 million settlement with Federal Trade Commission. Yet despite these setbacks it continued expanding, increasing dividend 75 percent and purchasing Sears, Roebuck & Co’s large credit card business.
Citigroup continues its global streamlining initiatives by shifting its focus toward fee-based businesses while divesting itself of non-core assets, streamlining organizational structures to remove redundant layers, consolidating leadership of global markets under Ernesto Torres Cantu’s oversight, and streamlining organizational structures as it strives to remain focused on its core businesses while driving growth of wealth management and treasury services.
Financial Crisis
New York-based Citicorp became a megabank in 1998 after merging with Travelers Group Inc, creating what the Economist termed “a global financial supermarket.” Contrary to Glass-Steagall Act rules prohibiting banks from owning insurance firms or vice versa, Citicorp and Travelers agreed to merge, creating the $690.8 billion Citigroup with both John Reed, chairman of Citicorp, and Sanford Weill, chairman of Travelers sharing control.
Though the merger greatly increased Citigroup’s size, it also caused much controversy. In 2002, allegations surfaced about illegal practices at its investment banking and equity research unit led by Jack Grubman’s division that included hyped stocks which later crashed as well as large fees paid out to Salomon Smith Barney by their companies for advice they received from Grubman.
The Financial Crisis of 2008 had an enormous impact on Citigroup and their mortgage-backed securities holdings, leading them to incur billions in losses that they partially compensated for by selling off stakes in several insurance companies and their ownership of U.S. Postal Service pension fund. Under government bailout plans, Citi had to give up some preferred shares as well as limit executive pay.
Citigroup has taken strides in recent years to modernise its controls and technology, with plans in place to achieve carbon neutrality for all financing activities by 2050 – an objective pledged by new chief executive Jane Fraser on her first day in her position.
Company officials recently unveiled plans to retool its credit card business and enhance digital technology offerings, such as Citi Velocity’s mobile trading platform that allows customers to trade and monitor their portfolio in real time; virtual banking products like Citibank Express that allow customers to complete a variety of transactions typically performed at branch offices; download this app on both Apple and Android devices for use; plus they recently announced they’ll introduce digital versions of popular Citibank accounts!
