Citigroup Inc. is a global diversified financial services holding company based in New York. The U.S. government owns 27% of the banking giant following bailout measures taken to rescue it from collapse amid the global financial crisis.
Citi recently repaid the $20 billion balance owed the government, although the Treasury Department still owns more than one-fourth of Citi's common stock. Now the bank is working to reduce the government shadow and sell off its peripheral businesses, focusing on its core of investment banking and global consumer and business banking. The company is evolving from a financial supermarket into a leaner company that caters to big institutions and affluent individuals, particularly in fast-growing emerging markets.
Citi has been viewed as the riskiest member of the Big Four money-center banks, according to Barron's magazine. It is splitting itself into two businesses, shedding several businesses and shrinking itself by a third. The company recently spun off its Smith Barney brokerage unit into a joint venture with Morgan Stanley, called Morgan Stanley Smith Barney, which will come under CitiHoldings. It is also shed Primerica, its life-insurance and mutual-fund sales unit, which recently went public. The bank is also streamlining its investment-banking operation -- one of the world's largest. It is scaling back its proprietary trading and selling off two consumer-finance units and its private-label credit-card business. Its U.S. consumer strategy remains a work in progress. The overhaul marks the end of Citigroup's one-stop-shop financial supermarket model, which had been pieced together over the years by legendary dealmaker, Citi's ex-CEO Sandy Weill.
Citi's turnaround strategy appears to be starting to work, but it's still expected to be a long slog to recovery. Morale is low after the company cut 110,000 jobs and sold off assets. The bank's North American mortgage and credit card businesses are still ailing due to the troubles in those markets. Among Citi's positives are its strong capital position, high loan-loss reserves, appealing global-consumer and corporate-banking franchise and relatively small exposure to commercial real estate, Barron's reports. Transaction-services business, which moves money around the world for governments, giant corporations and other organizations, remained lucrative. Retail-banking businesses outside the U.S. appear to be rebounding. The bank is expected to invest heavily in these efforts in Asia and Latin America. Its management challenges include working with its new government partners while also recovering from heavy losses. According to The Wall Street Journal, some Citi employees have said that working for the financial colossus with its huge bureaucracy was already like working for the government. Despite criticism from government officials of a variety of corporate expenditures, the bank saw through its $400 million naming deal for Citi Field, the New York Mets new ballpark.
Government-mandated pay-out restrictions have reportedly put pressure on the bank's ability to retain top talent. The White House pay czar slashed cash compensation by 96% for its top 25 earners and overall compensation by 70%. Bonuses for the next 75 executives at Citi and other firms were ordered to come from a fixed pool and annual cash salaries limited to $500,000. CEO Vikram Pandit's total compensation for 2009 was $1.
The firm is limiting cash bonus payments at below $100,000 and, following the lead of other big banks, is paying a larger portion in long-term stock. Employees are getting about 25% to 60% of their compensation as long-term deferred stock or cash. The limit doesn't count "deferred cash" awards, which some investment bankers and traders are getting. Those payments are locked up in interest-bearing accounts for a few years. The company is doling out shares that employees can sell within months—much sooner than normally allowed.
The company is considering offering loans to cash-strapped workers. It decided against special loan program but is continuing to offer forgivable loans to a handful of employees, primarily as a recruiting and retention tool. About 200 of the firm's highest-paid employees are subject to clawback provisions for violating company policies on risk or use of capital.
Citi recently changed the way its financial advisers operate, dumping commissions to instead charge a fee of about 1% on investable assets. It has about 600 advisers at bank branches and others that didn't join the joint venture with Morgan Stanley.
Citi has several employee-initiated networks, including African heritage, Asian heritage, Hispanic, working parents, women, and lesbian, gay, bisexual and transgender issue groups.