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
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.