The company was formed by the merger of banking giant Citicorp and financial conglomerate Travelers Group in ; however, Travelers was spun off from the company in Citigroup has over million customer accounts and does business in more than countries. Citigroup suffered huge losses during the financial crisis of and was rescued in November in a massive stimulus package by the U.
Citigroup is the holding company for the following divisions: As such, the company history dates back to the founding of: 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 purchase of U. The bank introduced its First National City Charge Service credit card—popularly known as the " Everything card " and later to become MasterCard —in Shortly afterward, the bank launched the Citicard, which pioneered the use of hour ATMs.
Under his leadership, the next 14 years would see Citibank become the largest bank in the United States and the largest issuer of credit cards and charge cards in the world, and expand its global reach to over 90 countries. 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 after taking charge of the company earlier that year.
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 , 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 With the acquisition, the group became Travelers Inc.
During this period, Travelers acquired Shearson Lehman —a retail brokerage and asset management firm that was headed by Weill until  —and merged it with Smith Barney. 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 abandoned in October after a series of financial scandals that tarnished the bank's reputation. Through this mechanism, existing shareholders of each company owned about half of the new firm. The chairmen of both parent companies, John S. 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 He's rough on the edges. But Citibank knows the bank as an institution is in trouble—it can't get away anymore with passive selling—and Plumeri has all the passion to throw a glass of cold water on the bank.
In , Citigroup made additional acquisitions: The company spun off its Travelers Property and Casualty insurance underwriting business in It was also difficult to sell this kind of insurance directly to customers since most industrial customers are accustomed to purchasing insurance through a broker.
In spite of divesting Travelers Insurance, Citigroup retained Travelers' signature red umbrella logo as its own until February , when Citigroup agreed to sell the logo back to St. Paul Travelers,  which renamed itself Travelers Companies. Citigroup also decided to adopt the corporate brand "Citi" for itself and virtually all its subsidiaries, except Primerica and Banamex. Heavy exposure to troubled mortgages in the form of collateralized debt obligation CDOs , compounded by poor risk management, led Citigroup into trouble as the subprime mortgage crisis worsened The company had used elaborate mathematical risk models which looked at mortgages in particular geographical areas, but never included the possibility of a national housing downturn, or the prospect that millions of mortgage holders would default on their mortgages.
Trading head Thomas Maheras was close friends with senior risk officer David Bushnell, which undermined risk oversight. Bowen III , the chief underwriter of Citigroup's Consumer Lending Group, began warning the board of directors about the extreme risks being taken on by the mortgage operation that could potentially result in massive losses.
Bowen's responsibility was essentially to serve as the quality control supervisor ensuring the unit's creditworthiness. Many of the mortgages were not only defective, but were fraudulent. Bowen attempted to rouse the board via weekly reports and other communications. On November 3, , Bowen emailed Citigroup Chairman Robert Rubin and the bank's chief financial officer , head auditor and the chief risk management officer to again expose the risk and potential losses, claiming that the group's internal controls had broken down and requesting an outside investigation of his business unit.
The subsequent investigation revealed that at the Consumer Lending Group had suffered a breakdown of internal controls since Regardless of the findings of the investigation, Bowen's charges were ignored, despite the fact that withholding such information from shareholders violated the Sarbanes—Oxley Act SOX , which he had pointed out.
Citigroup eventually stripped Bowen of most of his responsibilities and informing him that his physical presence was no longer required at the bank. The Financial Crisis Inquiry Commission asked him to testify about Citigroup's role in the mortgage crisis, and he did so, appearing as one of the first witnesses before the Commission in April As the crisis began to unfold, Citigroup announced on April 11, , that it would eliminate 17, jobs, or about 5 percent of its workforce, in a broad restructuring designed to cut costs and bolster its long underperforming stock.
With the crisis worsening, Citigroup announced on January 7, that it was considering cutting another 5 percent to 10 percent of its , member-workforce. On November 17, , Citigroup announced plans for about 52, new job cuts, on top of 23, cuts already made during in a huge job cull resulting from four quarters of consecutive losses and reports that it was unlikely to be in profit again before As a result, late in the evening on November 23, , Citigroup and Federal regulators approved a plan to stabilize the company and forestall a further deterioration in the company's value.
On November 24, , the U. The assets remained on Citigroup's balance sheet; the technical term for this arrangement is ring fencing.
In return the bank gave the U. The government obtained wide powers over banking operations. Citigroup agreed to try to modify mortgages, using standards set up by the FDIC after the collapse of IndyMac Bank , with the goal of keeping as many homeowners as possible in their houses.
According to the article, former CEO Pandit said if Citigroup was allowed to unravel into bankruptcy, " governments around the world would be trying to figure out how to pay their employees". In , Jane Fraser , the CEO of Citi Private Bank, stopped paying its bankers with commission for selling investment products, in a move to bolster Citi Private Bank's reputation as an independent wealth management adviser, as opposed to a product pusher.
On January 16, , Citigroup announced its intention to reorganize itself into two operating units: Citicorp for its retail and institutional client business, and Citi Holdings for its brokerage and asset management.
The majority of its assets are U. It was created in the wake of the financial crisis as part of Citi's restructuring plan. It consists of several business entities including remaining interests in local consumer lending such as OneMain Financial, divestitures such as Smith Barney, and a special asset pool. While Citi Holdings is a mixed bag, its primary objective is to wind down some non-core businesses and reduce assets, and strategically "breaking even" in On February 27, , Citigroup announced that the U.
By December , the U. By December , Citigroup repaid the emergency aid in full and the U. On June 1, , it was announced that Citigroup would be removed from the Dow Jones Industrial Average effective June 8, , due to significant government ownership.
Citigroup was replaced by Travelers Co. Morgan Stanley Smith Barney was previously Citi Smith Barney, Citi's global private wealth management unit, providing brokerage, investment banking and asset management services to corporations, governments and individuals around the world.
With over offices worldwide, Smith Barney held 9. In , Citigroup achieved its first profitable year since According to Treasury spokeswoman Nayyera Haq, "This IRS tax rule was designed to stop corporate raiders from using loss corporations to evade taxes, and was never intended to address the unprecedented situation where the government owned shares in banks.
And it was certainly not written to prevent the government from selling its shares for a profit. Citi Express modules, hour service units, were introduced in Colombia. Citi opened new branches in three new cities in China as part of its plan to expand Citi's presence in People's Republic of China to 13 cities.
Citi Branded Cards introduced several new products in , including: It also has Latin America partnership cards with Colombia-based airline Avianca and with Banamex and AeroMexico; and a merchant loyalty program in Europe. Citibank is also the first and currently the only international bank to be approved by Chinese regulators to issue credit cards under its own brand without cooperating with Chinese state-owned domestic banks.
On March 13, , the Federal Reserve reported Citigroup is one of the four financial institutions, out of 19 major banks, that failed its stress tests , designed to measure bank capital during a financial crisis.
On March 26, , the Federal Reserve reported that Citigroup was one of the five financial institutions that had failed its stress tests, but that Citigroup had failed it again. Unlike in the failed stress test in , the Fed failed Citigroup on qualitative concerns, which were left unresolved despite regulatory warnings, versus quantitative calculations.
The report specifically states as quoted that Citigroup failed "to project revenues and losses under a stressful scenario for material parts of the firm's global operations and its ability to develop scenarios for its internal stress testing that adequately reflects its full range business activities and exposures. In April , Citigroup announced that it would eliminate its bad bank , Citi Holdings.
Citi Capital Advisors CCA ,  formerly Citi Alternative Investments, was a Citi Hedge fund that offers various investment strategies across multiple asset classes, ranging from market strategies to infrastructure and private equity investing for institutional and high-net-worth investors.
Citigroup will continue to retain a sizable minority position in the new firm, but will slowly withdraw its capital over time by the July deadline stipulated by the Volcker Rule. Despite this deal, industry surveys pegged Citi as the biggest banking player in the forex market.
The operations being sold include 27 branches serving approximately , clients in the two countries. Citi will continue to offer corporate and institutional banking and wealth management in Panama and Costa Rica. Costco accepts other Visa cards as well. In April , Citi was given regulatory approval for its 'living will,' its plans to shut down operations in the event of another financial crisis.
Citigroup Center , a diagonal-roof skyscraper located in Midtown Manhattan , New York City, is Citigroup's most famous office building, which despite popular belief is not the company's headquarters building. Citigroup has its headquarters located in downtown Tribeca Greenwich. It has shops and restaurants serving Metra customers via the Ogilvie Transportation Center.
In , Japanese regulators took action against Citibank Japan loaning to a customer involved in stock manipulation. The regulator suspended bank activities in one branch and three offices, and restricted their consumer banking division.
In , Japanese regulators again took action against Citibank Japan, because the bank had not set up an effective money laundering monitoring system.
The regulators suspended sales operations within Citibank's retail banking for a month. The case against Citigroup involved recommendations and sales of Class B and Class C shares of mutual funds. The Securities and Exchange Commission said that Citigroup had made misleading statements about the company's exposure to subprime mortgages. The lawsuit was on behalf of investors who purchased certificates in one of two mortgage-backed securities trusts from Citigroup Mortgage Loan Trust Inc in The lawsuit was initially brought by Sherry Hunt, a CitiMortgage employee.
This settlement amount makes the NMS the second largest civil settlement in U.More...