Citigroup Inc. (branded Citi ), is a major American financial services company based in New York, NY. Citigroup was formed from one of the world's largest mergers in history by combining the banking giant Citicorp and financial conglomerate Travelers Group on April 7, 1998.
Citigroup Inc. has the world's largest financial services network, spanning 140 countries with approximately 16,000 offices worldwide. The company employs approximately 300,000 staff around the world, and holds over 200 million customer accounts in more than 140 countries. It is a primary dealer in US Treasury securities.
Citigroup suffered huge losses during the global financial crisis of 2008 and was rescued in November 2008 in a massive bailout by the U.S. government. Its largest shareholders include funds from the Middle East and Singapore. On February 27, 2009, Citigroup announced that the United States government would be taking a 36% equity stake in the company by converting $25 billion in emergency aid into common shares. Since then the 36% stake has been reduced to 27% after Citigroup sold $21 billion of common shares & equity in the largest single share sale in US history , surpassing Bank of America's $19 billion share sale one month prior.
Citigroup is one of the Big Four banks in the United States, along with Bank of America, JP Morgan Chase and Wells Fargo.
History
Citigroup was formed on October 8, 1998, following the $140 billion merger of Citicorp and Travelers Group to create the world's largest financial services organization. The history of the company is, thus, divided into the workings of several firms that over time amalgamated into Citicorp, a multinational banking corporation operating in more than 100 countries; or Travelers Group, whose businesses covered credit services, consumer finance, brokerage, and insurance. As such, the company history dates back to the founding of: the City Bank of New York (later Citibank) in 1812; Bank Handlowy in 1870; Smith Barney in 1873, Banamex in 1884; Salomon Brothers in 1910.
Citicorp
The history begins with the City Bank of New York, which was chartered by New York State on June 16, 1812, with $2 million of capital. Serving a group of New York merchants, the bank opened for business on September 14 of that year, and Samuel Osgood was elected as the first President of the company. The company's name was changed to The National City Bank of New York in 1865 after it joined the new U.S. national banking system, and it became the largest American bank by 1895. It became the first contributor to the Federal Reserve Bank of New York in 1913, and the following year it inaugurated the first overseas branch of a U.S. bank in Buenos Aires, although the bank had, since the mid-nineteenth century, been active in plantation economies, such as the Cuban sugar industry. The 1918 purchase of U.S. overseas bank International Banking Corporation helped it become the first American bank to surpass $1 billion in assets, and it became the largest commercial bank in the world in 1929. As it grew, the bank became a leading innovator in financial services, becoming the first major U.S. bank to offer compound interest on savings (1921); unsecured personal loans (1928); customer checking accounts (1936) and the negotiable certificate of deposit (1961).
The bank changed its name to The First National City Bank of New York in 1955, which was shortened in 1962 to First National City Bank on the 150th anniversary of the company's foundation. 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.
In 1976, under the leadership of CEO Walter B. 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.
Travelers Group
Travelers Group, at the time of merger, was a diverse group of financial concerns that had been brought together under CEO Sandy Weill. Its roots came from Commercial Credit, a subsidiary of Control Data Corporation that was taken private by Weill in November 1986 after taking charge of the company earlier that year. Two years later, Weill mastered the buyout of Primerica - a conglomerate that had already bought life insurer A L Williams as well as stock broker Smith Barney. The new company took the Primerica name, and employed a "cross-selling" strategy such that each of the entities within the parent company aimed to sell each other's services. Its non-financial businesses were spun-off.
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.
Salomon Brothers
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 dealer and bulge bracket investment bank.. Salomon Brothers absorbed Smith Barney into the new securities unit termed Salomon Smith Barney; a year later, the division incorporated Citicorp's former securities operations as well. The Salomon Smith Barney name was ultimately abandoned in October 2003 after a series of financial scandals that tarnished the bank's reputation.
Citicorp and Travelers merger
On April 6, 1998, the merger between Citicorp and Travelers Group was announced to the world, creating a $140 billion firm with assets of almost $700 billion. The deal would enable Travelers to market mutual funds and insurance to Citicorp's retail customers while giving the banking divisions access to an expanded client base of investors and insurance buyers.
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.
In 2000, Citigroup acquired Associates First Capital Corporation, which, until 1989, had been owned by Gulf+Western (now part of National Amusements). The Associates was widely criticized for predatory lending practices and Citi eventually settled with the Federal Trade Commission by agreeing to pay $240 million to customers who had been victims of a variety of predatory practices, including "flipping" mortgages, "packing" mortgages with optional credit insurance, and deceptive marketing practices.
Travelers spin off
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