Citigroup controls one of the world's most widely spread financial brands, with a presence in more than 100 countries. It remains arguably the only truly global US bank. However it has only recently recovered from a five year crisis prompted by the 2008 credit crash. The group offers a huge range of services from traditional and investment banking to consumer finance, insurance, credit card services and asset management, and claims to operate more than 200m customer accounts across six continents. But its involvement in subprime investments, as well as exposure to high-risk mortgage and credit card customers, led to substantial losses during the late 2000s, and a complete reshuffle of the group's senior management team. By the beginning of 2009, Citi was a pale shadow of the giant it had been three years earlier. Newly appointed CEO Vikram Pandit launched a review of operations which ultimately led to the decision to transfer Citi's loss-ravaged consumer finance, brokerage and asset management businesses into a separate "bad banks" company, pending its sale or gradual liquidation. That unit is still being wound down, and the group's slow recovery led to the abrupt departure of Pandit himself during 2012.
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Adbrands Daily Update 15th Jan 2020: JP Morgan Chase got the reporting season off to a strong start. Strong performances in both consumer retail banking and investment trading gave the bank its highest ever annual profit of $36.4bn, up 12%, on revenues that grew 6% to $115.6bn. Citigroup enjoyed a similar but smaller lift, with revenues rising 2% to $74.3bn, but net income jumped 8% $19.4bn. However, Wells Fargo was still under considerable pressure, with revenues slipping back to $85.1bn while net income was dented by another round of litigation expenses. A $1.5bn charge in the final quarter caused annual profits to fall to $19.6bn. "We came out of the financial crisis as the most valuable and most respected bank in the US," CEO Charles Scharf told analysts. "But as you know we made some terrible mistakes and haven't effectively addressed our shortcomings." He is promising to do so now. Bank of America was flat. Revenues edged up a little to $91.2bn but net income fell 2.5% to $27.4bn as a result of a large impairment charge against a discountinued merchant services joint venture with First Data.
Adbrands Weekly Update 18th Oct 2018: All the big US banks did well in 3Q, even Wells Fargo which has spent the past couple of years struggling to bounce back from various misselling scandals. Trump's tax cuts were the major contributing factor to strong profit growth across the board. As usual, JP Morgan Chase led the field with a 24% jump in net profit to $8.4bn on revenues up 5% to $27.8bn. Strength in the consumer banking business offset weakness in investment trading. Bank of America reported a 32% jump in profits to $7.2bn on revenues of $22.8bn. Wells Fargo reported a similar leap, its best performance for several quarters, with profits also up 32% to $6.0bn on revenues of $21.9bn, up modestly on the year ago period. At Citigroup revenues dipped slightly to $18.4bn, but profit rose 12% to $4.6bn. Morgan Stanley and Goldman Sachs also performed strongly. Morgan delivered revenues of $9.9bn and profit of $2.1bn; Goldman had revenues of $8.7bn and profit of $2.5bn.
Adbrands Weekly Update 19th Jul 2018: US banks kicked off the reporting season with generally strong results. JP Morgan Chase led the charge as usual, with revenues up 6% to $27.7bn, while net income jumped 18% to $8.3bn, helped by higher interest rates and loan growth (and also of course a lower tax charge). "We see good economic growth, particularly in the US, where consumer and business sentiment is high," said CEO Jamie Dimon. Corporate and investment banking were particularly strong, offsetting declines in mortgages and credit cards. Bank of America took a slight hit on revenues, down very slightly to $22.6bn year-on-year because of a one-off gain in the prior period. Stripping out that exceptional item, comparable revenues were up 3% and net profits soared by 33% to $6.8bn. Citi's results were a little more muted, though revenues rose 2% to $18.5bn. In Citi's case, consumer banking generally fared better than investment banking, though the group's treasury and custody services were the strongest performer overall. Net profit jumped 15% to $4.5bn on the lower tax charge. Wells Fargo is still struggling under the cloud of its customer mistreatment scandals, with revenues down 3% to $21.6bn and an 11% fall in net profit to $5.2bn, despite the lower tax rate. The company said rising interest rates are putting homebuyers off new mortgages. There was much better news from Goldman Sachs, where profits soared 40% to $2.6bn on revenues up 19% to $9.4bn. Goldman also confirmed that Lloyds Blankfein will step down as CEO later this year, and will be succeeded by current president David Solomon. Morgan Stanley also reported a big jump of 39% in profits to $2.4bn - its second highest figure ever after 1Q 2018 - on revenues up 12% to $10.6bn.
Adbrands Weekly Update 18th Apr 2018: American banks enjoyed big profit gains from US tax reforms, as well as generally upbeat business sentiment. Net income at JPMorgan Chase jumped by 35% to an all-time record for the bank of $8.7bn, while Bank of America grew 30% to $6.9bn. However both were beaten in percentage terms by Morgan Stanley whose net earnings jumped by 38% to $2.7bn. Goldman Sachs was the next biggest profit jumper, up 26% to $2.8bn, while Citi was up 13% to $4.6bn. Wells Fargo gained 5% to $5.9bn, but said it might be required to restate those figures at a later date to accommodate a forthcoming $1bn regulatory settlement over mis-sold car insurance and mortgage fees. The lower tax rate alone generated a combined total of $2.9bn in extra profit from the six companies. Yet despite those big gains, investors were generally unimpressed by the lack of any significant growth in lending to businesses and consumers. That was one of the key underlying motivations for Republicans' tax reforms: to encourage borrowing and growth in the wider economy. So far, there's no sign of that, as JPMC finance chief Marianne Lake admitted: "I think we have to recognize that tax reform is in its early stages." As far as revenues were concerned, JPMC remained the clear leader among US banks with 12% growth to $27.9bn, but reigning #2 Wells Fargo slipped back to $21.9bn - it was the only bank to report a year on year decline. That allowed BofA to reclaim second place with $23.1bn. Citi had $18.9bn. Morgan Stanley topped Goldman again with $11.1bn to $10.0bn respectively.
Adbrands Weekly Update 18th Jan 2018: Most US companies will take an exceptional hit in their 4Q results from President Trump's tax reform bill, not least the big banks who kicked off the reporting season this week. The cut in the US corporate tax rate will significantly benefit all companies in the future but it creates a short-term problem for businesses that accumulated big losses during the 2008 financial crisis which they had intended to set off for tax purposes against future profits. A lower tax rate will make those deferred credits harder to use, so they now mostly have to be written off. That's a bigger issue for some companies than for others. The biggest damage from the tax bill was felt by Citigroup, which swallowed a mammoth $22bn charge against past deferred tax assets. That represents one of the biggest accounting charges in US corporate history, wiping out profits for the final quarter, as well as for the year as a whole. Revenues rose 2% to $71.5bn for the year, but the group reported a net loss of $6.2bn.
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Free for all users | see full profile for current activities: This giant business was the creation of financial entrepreneur Sanford ("Sandy") Weill, who forged a merger in 1998 between his own Travelers Group and banking group Citicorp. However the corporate roots go back very much further. The City Bank of New York, later the National City Bank, was founded in 1812 by the first commissioner of the US Treasury, Colonel Samuel Osgood. Primarily a commercial bank, its main purpose was to support the city's fast-growing international trading community importing and exporting goods from around the world. In the early years of the 20th century the bank was the first to open branches worldwide, starting with London, Shanghai and other Asian centres in 1902, and in Latin America in 1904. By 1939 National City Bank had more than 100 branches outside the US.
Back home, the bank moved into retail banking, becoming the first commercial bank to offer personal loans during the 1920s. In 1955, the business merged with First National New York to form First National City Bank. In 1974 the enlarged group rebranded itself as Citicorp, and also that decade jumped into the credit card market with wide-ranging agreements with Visa and MasterCard. By 1977, the group's banking subsidiary Citibank was the largest US issuer of credit cards, a position strengthened by the acquisition of Carte Blanche in 1978 (later sold) and Diners Club in 1981. That year Citicorp overtook BankAmerica as the country's biggest bank, rolling out its retail banking service with an extensive ATM network. It also became a major lender to the new generation of US property entrepreneurs including Donald Trump. Internationally the group was also becoming increasingly involved in developing markets making substantial loans in Latin America.
As the 1980s boom turned to bust at the end of the decade, Citicorp was suddenly left very exposed by its over-generous lending program, with a $10bn portfolio of potential bad debt. As a result, in 1991 the business reported a loss of almost $460m. Required by the Federal Reserve to strengthen its capital base to avoid the danger of collapse, Citicorp went looking for $1bn of further funding from its shareholders but initially found no takers. The share price plummeted. Eventually the business was effectively saved by Prince Alwaleed bin Talal, a little-known member of the Saudi royal family, who paid around $800m for a 15% stake at the very bottom of the market. Just two weeks later a group of international investors backed Prince Alwaleed with a further $600m of shares. Citicorp was saved, and its shares subsequently soared in value, earning Prince Alwaleed an enduring reputation as one of the world's smartest investors. (He remains Citigroup's single biggest shareholder with just under 5%).
Meanwhile chairman John Reed embarked on a major clear out of loss-making assets, selling a large chunk of the property portfolio as well as a number of non-core subsidiary businesses. The group returned quickly to profit. By 1997 Citicorp had re-established itself as one of the world's most respected financial institutions with a global network of almost 3,500 offices in 98 countries, and the biggest worldwide credit card business.
At this point, Sandy Weill entered the picture. Weill was an investment banker by training. During the late 1970s he built up brokerage firm Shearson Loeb Rhoades, selling it to American Express in 1981. He left Amex in 1985, uncomfortable with that company's blue-blood country club corporate lifestyle. Weill bought finance business Commercial Credit, which he then used as the vehicle for a series of further acquisitions including Primerica, a financial services business which also owned brokerage Smith Barney Harris Upham. In 1993, he rescued what was left of Shearson from American Express, and also snapped up troubled insurance giant Travelers.
Travelers was in fact North America's first accident insurer, founded in 1864 in Connecticut. Over the following years the business had added a variety of new insurance services, including the first US car insurance, life insurance and travel insurance. During the 20th century Travelers had diversified widely, not least into the over-inflated property market during the 1980s. By the end of that decade the business was in a similar position to that of Citicorp. Weill set about consolidating all of his various assets under the Travelers brand, selling off life insurance. He merged the group's property and casualty operations with those of rival Aetna to form Travelers Property Casualty and floated a 15% stake. In 1997 he acquired investment bank Salomon Brothers, merging it with Smith Barney to form Salomon Smith Barney.
Yet while the business was now huge, with revenues of $37bn in 1998, it was also almost entirely US-based. That year Weill approached Citigroup's John Reed with the proposal for a mammoth $70bn merger, the biggest ever at that time. This pooled Citicorp's international network and credit card business with Travelers' wide ranging insurance and brokerage businesses, the first US business to bring all those services under one umbrella. (In fact under the terms of the Glass-Steagall Act introduced after the Great Depression of the 1920s, the combination of banking and insurance was strictly speaking illegal. However, Weill was confident that he could use the benefits of the merger to argue for a change in the law. The Glass-Steagall Act was superseded in 1999 by new federal provisions allowing for greater diversification of financial services companies). The next two years were spent in a process of consolidation, as the two giants gradually combined, shedding more than 10,000 jobs in the process, including ultimately Reed's. Initially, the two men shared the title of co-chairman & CEO; but their working relationship quickly deteriorated. Former US Treasury secretary Robert Rubin was hired as an intermediary, and Reed eventually stepped down in 2000. That year the group also acquired the investment banking arm of UK-based Schroders, as well as consumer finance company Associates First Capital. Citigroup also bought back the remaining public shares in Travelers Property Casualty.
In 2001 Citigroup acquired Banamex, one of the biggest banks in Mexico, took a 20% stake in troubled Japanese brokerage Nikko Securities, later Nikko Cordial, and also acquired the European American Bank from Dutch financial services giant ABN Amro. Also that year the group launched a global campaign designed to boost recognition of the Citigroup logo. Despite the group's mammoth size, the Citigroup brand has never enjoyed the proportionate brand strength or recognition of American Express, a company less than a third its size. As a result rumours periodically emerge that Sandy Weill might attempt a bid to acquire the smaller company before his ultimate departure from Citigroup. No such deal materialized, and Weill stepped down as CEO of Citigroup in 2003.
In 2002 the group once again floated a 20% stake in Travelers Property Casualty, raising $4bn in cash, and eventually spun off the remaining shares to shareholders. (Travelers agreed to merge with St Paul's Companies in 2004). In 2002 Citigroup acquired San Francisco's Golden State Bancorp for $5.8bn. However a few months later the group was dragged into investigations of failed groups Enron and WorldCom as a result of allegations that its brokerage arm Salomon Smith Barney had indirectly helped to manipulate those companies' share prices. Several lawsuits alleged that Citigroup's published research had deliberately painted too positive a picture of WorldCom's prospects in order to boost sales of a bond offer it had partially underwritten. As a result the group agreed to split the research and brokerage units into two separate businesses. Citigroup later agreed to pay $400m to settle accusations of conflicts of interest in its investment banking business. In 2004 it resolved a civil lawsuit over its involvement with WorldCom by agreeing a settlement of $2.65bn, of which more than $1bn was paid out to investors who lost money through the purchase of WorldCom shares. A year later a further $2bn was paid out to settle another case which claimed that Citigroup helped Enron engineer transactions to remove debts from its balance sheet. Yet another Enron case was finally settled in 2008 with a payout of $1.66bn.
Legal challenges piled on top of each other during the rest of 2004, caused in part at least by unorthodox behaviour by Citigroup employees. In summer 2004 the group upset rivals as well as regulators when it launched an unorthodox hit-and-run raid on the European government bond markets. Citigroup traders unloaded around €11bn of European government bonds in just two minutes, causing prices to plummet. Half an hour later they bought €4bn of the bonds at the much lower price, making a substantial profit. Faced with numerous complaints over the raid, the group issued an unprecedented apology. Regulators in the UK, Belgium, Portugal and Italy launched investigations soon afterwards. The UK regulator issued a $25m fine in 2005.
Also in 2004, Citigroup faced several obstacles in Asia. Japanese regulators forced the group to close its private banking unit there in September for violation of banking laws designed to prohibit money-laundering, and Korean regulators subsequently announced their own investigation of the local Citibank unit. The group was also sued by investment manager Globalvest which alleged Citigroup was involved in a scheme to devalue that company's investments in two Brazilian telephone companies so that it could buy them more cheaply. Humbled by these several embarrassments, the group apologised for its aggressive tactics and promised to work harder to earn the respect of the international community. Yet in 2005, there was further embarrassment when the group was forced to admit that computer tapes containing personal financial records for almost 4m American customers were lost by delivery service UPS while in transit to a credit bureau.
Also in 2005, the group agreed to sell life insurer Travelers Life and Annuity to MetLife for around $11.5bn. That deal marked effectively the final unwinding of the mammoth merger between Citibank and Travelers which took place in 1998. Also in 2005, the group swapped its Asset Management unit in the US for the private client brokerage and capital markets businesses of Legg Mason.
The growing problems which began to emerge in the 2007 led to a series of changes among the senior management team. Charles ("Chuck") Prince inherited the title of chairman-CEO from Sandy Weill in 2006, but resigned in November 2007 in the wake of the first substantial write-downs by Citigroup's investment banking division in connection with sub-prime mortgages. He was replaced as CEO at the end of the year by Vikram Pandit. Sir Win Bischoff, previously chairman of Citigroup Europe, was appointed as group chairman, but was eventually replaced in January 2009 by former Time Warner chief Richard Parsons. Former US Secretary of State Robert Rubin remained chairman of the executive committee through the tumult of 2007 and 2008, but also eventually tendered his resignation in early 2009. Sallie Krawcheck, previously chairman & CEO, Global Wealth Management, resigned abruptly in September 2008 after a disagreement on strategy. She was replaced by Michael Corbat. See full profile for current activities
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