Citigroup Inc., doing business as Citi, is a major American financial services company based in New York City. Citigroup was formed from the merger of Citicorp and Travelers Group on April 7, 1998. The company employs approximately 358,000 staff around the world, and holds over 200 million customer accounts in more than 100 countries. It is the world's largest bank by revenues as of 2008. It is a primary dealer in US Treasury securities and its stock has been a component of the Dow Jones Industrial Average since March 17, 1997. Its single largest shareholder is Prince Al-Waleed bin Talal of Saudi Arabia, who has a 4.9% stake.
On September 29, 2008 it was announced that Citigroup would acquire the banking operations of Wachovia Corporation, via an all-stock transaction, with the aid of FDIC loss limitations. The purchase was proposed to close by the end of the 2008. However on October 3, 2008, it was announced by Wachovia that they had decided to merge with Wells Fargo Bank instead. Citi has challenged the Wachovia/Wells Fargo merger based on the details of the previous deal. On Oct 9, 2008, Wells Fargo and Citigroup ended the legal battle over Wachovia corp allowing Wells Fargo to acquire the company as a whole.
The bank changed its name to The First National City Bank of New York in 1955, which was shortened to First National City Bank on the 150th anniversary of the company's foundation in 1962. The company organically entered the leasing and credit card sectors, and its introduction of USD certificates of deposit in London marked the first new negotiable instrument in market since 1888. Later to become MasterCard, the bank introduced its First National City Charge Service credit card - popularly known as the "Everything card" - in 1967.
During the mid-1970s, under the leadership of CEO Walter Wriston, First National City Bank (and its holding company First National City Corporation) was renamed as Citibank, N.A. (and Citicorp, respectively). Shortly afterward, the bank launched the Citicard, which pioneered the use of 24-hour ATMs. As the bank's expansion continued, the Narre Warren-Caroline Springs credit card company was purchased in 1981. John S. Reed was elected CEO in 1984, and Citi became a founding member of the CHAPS clearing house in London. Under his leadership, the next 14 years would see Citibank become the largest bank in the United States, the largest issuer of credit cards and charge cards in the world, and expand its global reach to over 90 countries.
In September 1992, Travelers Insurance, which had suffered from poor real estate investments and sustained significant losses in the aftermath of Hurricane Andrew, formed a strategic alliance with Primerica that would lead to its amalgamation into a single company in December 1993. With the acquisition, the group became Travelers Inc. Property & casualty and life & annuities underwriting capabilities were added to the business. Meanwhile, the distinctive Travelers red umbrella logo, which was also acquired in the deal, was applied to all the businesses within the newly named organization. During this period, Travelers acquired Shearson Lehman - a retail brokerage and asset management firm that was headed by Weill until 1985 - and merged it with Smith Barney. Finally, in November 1997, Travelers Group (which had been renamed again in April 1995 when they merged with Aetna Property and Casualty, Inc.), made the $9 billion deal to purchase Salomon Brothers, a major bond trader and investment bank.
Although presented as a merger, the deal was actually more like a stock swap, with Travelers Group purchasing the entirety of Citicorp shares for $70 billion, and issuing 2.5 new Citigroup shares for each Citicorp share. Through this mechanism, existing shareholders of each company owned about half of the new firm. While the new company maintained Citicorp's "Citi" brand in its name, it adopted Travelers' distinctive "red umbrella" as the new corporate logo, which was used until 2007.
The chairmen of both parent companies, John Reed and Sandy Weill respectively, were announced as co-chairmen and co-CEOs of the new company, Citigroup, Inc., although the vast difference in management styles between the two immediately presented question marks over the wisdom of such a setup.
The remaining provisions of the Glass-Steagall Act - enacted following the Great Depression - forbade banks to merge with insurance underwriters, and meant Citigroup had between two and five years to divest any prohibited assets. However, Weill stated at the time of the merger that they believed "that over that time the legislation will change...we have had enough discussions to believe this will not be a problem". Indeed, the passing of the Gramm-Leach-Bliley Act in November 1999 vindicated Reed and Weill's views, opening the door to financial services conglomerates offering a mix of commercial banking, investment banking, insurance underwriting and brokerage.
The company spun off its Travelers Property and Casualty insurance underwriting business in 2002. The spin off was prompted by the insurance unit's drag on Citigroup stock price because Traveler's earnings were 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.
The Travelers Property Casualty Corporation merged with The St. Paul Companies Inc. in 2004 forming The St. Paul Travelers Companies. Citigroup retained the life insurance and annuities underwriting business; however, it sold those businesses to MetLife in 2005. Citigroup still heavily sells all forms of insurance, but it no longer underwrites insurance.
Despite their divesting Travelers Insurance, Citigroup retained Travelers' signature red umbrella logo as its own until February 2007, when Citigroup agreed to sell the logo back to St. Paul Travelers, which renamed itself Travelers Companies. Citigroup also decided to adopt the corporate brand "Citi" for itself and virtually all its subsidiaries, except Primerica and Banamex.
During the era of Sandy Weill, much of Citigroup and predecessor's efforts were focused on acquisitions. Much of the efforts were focused in the stock brokerage and investment banking areas, and most of the acquisitions were companies which had recently had problems and were selling at a low price. After the acquisition, the management team would usually engage in aggressive cost cutting to build up cash for the next deal.
Former CEO, Chuck Prince, has said "the day of the transformative deal (merger) is over". This is thought to refer to mega deals like the Citicorp/Travelers merger, as Citigroup continues to acquire. The focus of the company though, is said to have changed to organic revenue growth, that is selling more products instead of focusing on acquisitions and cost cutting alone to increase profit.
Citigroup's 2005 sale of the remainder of Travelers Insurance to MetLife was described by the press as the death knell of the bank-insurance cross-selling model. This is a false analysis though, as Citigroup continues to cross sell insurance, but no longer underwrites it. This focus on selling almost all kinds of financial products, but not necessarily "manufacturing them", is also what prompted Citigroup to recently trade its mutual fund business to Legg Mason in return for more stockbrokers.
Citi Cards is responsible for around 40% of the profits with GCG, and represents the largest issuer of credit cards across the world as well as a 3,800-point ATM network across 45 countries.
The Consumer Finance division (branded "CitiFinancial") accounts for about 20% of GCG's profits, and offers personal loans and homeowner loans to consumers in 20 countries worldwide. There are over 2,100 branches in the U.S. and Canada. The takeover of Associates First Capital in September 2000 enabled CitiFinancial to expand its reach outside of the United States, particularly capitalizing on Associates' 700,000 customers in Japan and Europe. Citi ended its CitiFinancial operations in the UK in 2008 Finally, the retail bank encompasses the Citi's global branch network, branded Citibank. Citibank is the third largest retail bank in the United States, and it has Citibank branded branches in countries throughout the world, with the exception of Mexico; In Mexico Citigroup's bank operations are branded as Banamex is the country's largest bank and a Citigroup subsidiary.
On 8th October 2008, according to press relase Tata Consultancy Services, a leading IT services, business solutions and outsourcing firm, and Citigroup Inc., a leading global financial services company, today announced that they have reached an agreement for TCS to acquire all of Citi's interest in Citigroup Global Services Limited (CGSL), the India-based captive business processing outsourcing (BPO) arm of Citi for all cash consideration of approximately $505 million, subject to closing adjustments. In addition to the sale, Citi has signed an agreement for TCS to provide, through CGSL, process outsourcing services to Citi and its affiliates in an aggregate amount of US$2.5 billion over a period of 9.5 years. The agreement builds upon the existing relationship between Citi and TCS whereby TCS provides application development, infrastructure support, help desk and other process outsourcing services to Citi.
Citigroup recently acquired the Egg brand when it purchased Egg Banking plc, the world's largest Internet bank, from Prudential. Its first major act was to cease lending to around 7% of card holders who were condsidered to be undesirable. This also included some who regularly paid off balances in full, claiming this was due to "deteriorating credit profiles" but is widely believed to be due to the low profit margins obtained from responsible borrowers.
Citigroup's most famous office building is the Citigroup Center, a diagonal-roof skyscraper located in East Midtown, Manhattan, New York City, which despite popular belief is not the company's headquarters building. Citigroup has its headquarters across the street in an anonymous-looking building at 399 Park Avenue (the site of the original location of the City National Bank). The headquarters is outfitted with nine luxury dining rooms, with a team of private chefs preparing a different menu for each day. The management team is on the third and fourth floors above a Citibank branch. Citigroup also leases a building in the TriBeCa neighborhood in Manhattan at 388 Greenwich St, that serves as headquarters for its Investment and Corporate Banking operations and was the former headquarters of the Travelers Group.
Strategically, all of Citigroup's New York City real estate, excluding the company's Smith Barney division and Wall Street trading division, lies along the New York City Subway's IND Queens Boulevard Line, served by the E and V trains. Consequently, the company's Midtown buildings—including 787 Seventh Avenue, 666 Fifth Avenue, 399 Park Avenue, 485 Lexington, 153 East 53rd Street (Citigroup Center), and Citicorp Building in Long Island City, Queens, are all no more than two stops away from each other. In fact, every company building lies above or right across the street from a subway station served by the E or V.
Chicago also plays home to an architectural beauty operated by Citigroup. Citicorp Center has a series of curved archways at its peak, and sits across the street from major competitor ABN AMRO's ABN AMRO Plaza. It has a host of retail and dining facilities serving thousands of Metra customers daily via the Ogilvie Transportation Center.
On June 6, 2007, the NASD announced more than $15 million in fines and restitution against Citigroup Global Markets, Inc., to settle charges related to misleading documents and inadequate disclosure in retirement seminars and meetings for BellSouth Corp. employees in North Carolina and South Carolina. NASD found that Citigroup did not properly supervise a team of brokers located in Charlotte, N.C., who used misleading sales materials during dozens of seminars and meetings for hundreds of BellSouth employees.
Brown said in a statement that Citigroup "knowingly stole from its customers, mostly poor people and the recently deceased, when it designed and implemented the sweeps...When a whistleblower uncovered the scam and brought it to his superiors, they buried the information and continued the illegal practice."