Citigroup's confused chemistry

When Citibank and the Travelers Group merged, the hype was about cross-selling retail products. Citi's distribution network and Travelers' products would be a potent combination, claimed Sandy Weill and John Reed. The investment banking brew had less to offer and was expected to be more troublesome. But so far it isn't working out like that. The investment bank is the success story. Meanwhile, cross-selling isn't working. Antony Currie reports

Sandy Weill Citigroup is in big trouble. A strange thing to say given its great results, exceptionally strong capital base and its avoidance, thus far, of too many debilitating conflicts of ego. How tempting it must be for co-CEOs Sandy Weill and John Reed to portray this as a smooth ride well planned. But the merger was sealed with a handshake and not much else. No detailed business plans were drawn up, no decisions were made on who'd run what. It was close to flying by the seat of one's pants. Short-term success has caused many to forget this. But it is blinding insiders and outsiders alike to the problems that are developing. An unhappy future Consider this projection. Within five years Citigroup will have to be broken up. Weill will have had to continue his acquire-and-cut-costs strategy to keep earnings up, all the while causing more cultural problems and increasing bureaucracy. Investors hoping for a banking play will be increasingly irritated at the volatile returns from the investment bank and the low returns from insurance underwriting.