One of the "big four" US Banks, Citigroup assets hold a major portion of US consumer deposits. The four major divisions of Citigroup are divided into consumer banking, global cards, institutional clients and global wealth management. Due to its large global presence, Citigroup has a reputation for being the largest network of financial services in the world, and international offices outnumber those in the US alone. The bread and butter of Citigroup has not historically been its banking unit, but with recent restructuring, Citi has been fighting hard to retain clients and attract new ones. Citibank has deployed attractive interest rates, freebies with checking accounts and rewards programs to entice consumers into depositing their hard-earned paychecks into Citi accounts.
Citibank's Not So Checkered Past
Citigroup has spent a lot of time in the news lately, so let's step back and examine the beginnings of the financial giant. Founded in 1812, The City Bank of New York served the well to do Manhattan merchant community. By 1895, The National City Bank of New York became the largest American bank. Quick to jump on the international market bandwagon, the bank expanded its holdings in the early 1900s, acquiring the International Banking Corporation.
Success followed again, and in 1929 (another historic year) the group was the largest commercial bank across the globe. Its mark on US financial history is significant. The bank's growth allowed innovations to be widely distributed to US consumers. It was the first US bank offering Americans compound interest on savings accounts, launched customer checking accounts, and was the first to sell negotiable certificates of deposit.
Citigroup was originally another business arm of Citibank, but Citibank has since (ironically) become a subsidiary of the former. The modern Citigroup was largely built up in the 70s and 80s by CEO Sandy Weill, who served until 2003 and as the board's chairman until 2006. Chuck Prince served as CEO of Citi from 2003 to 2007. Prince stepped down as CEO following allegations of taking risks with CDOs and riskier investment products. The bank's image further suffered when images of Weill and other executives using the company's private jet for a vacation surfaced just days after the taxpayer-funded bailout occurred.
Life Preserver
Following the collapse of Bear Stearns, Citigroup still considered the risks of CDOs (Collateralized Debt Obligations) to be low, and excluded them from risk analysis. These highly leveraged mortgage backed securities eventually became the downfall of Citigroup and several other banking institutions.
In an effort by the US government to strengthen the weakened financial system, Citigroup received tens of billions dollars of Federal TARP money in 2008 and 2009, following a year of massive job cuts and losses on investments. A life preserver to the drowning financial giant was thrown.
In 2009, Citigroup converted $25 billion of TARP money into common shares for purchase by the US governemnt. Owners holding the biggest stakes in Citi following the sale was approximately 36% by the US Government, 11% by the Government of Singapore Investment Company, 6% by the Kuwait Investment Authority, 5% by the Abu Dhabi Investment Authority and 4.3% by the Kingdom Holding Company of Saudi Arabia. Citigroup has since repaid a portion of the TARP funds, but its reputation was tarnished considerably in light of other scandals and allegations.
Consumer Offerings
The troubles of Citigroup have not largely affected US banking customers. If anything, the bailout and subsequent scandals pushed the bank to enhance its consumer banking programs to regain customers' trust. Citibank offers a wide range of products, including several interest bearing checking accounts, a rarity in modern banking. The online banking center at Citi offers easy to navigate menus, and links to other Citi accounts and services. State of the art technology is a given with a large company like this.
Almost every checking account at Citibank has a minimum balance requirement, making Citi a better choice for those who park extra cash on a regular basis. The basic checking account has a monthly fee, so there are no true "free" account offerings other than a student account. That said, Citibank offers a lot of value added services with its accounts, such as fraud protection, online check imaging, and 24-hour customer support.
For those currently enrolled in college or graduate school, the student checking account can be an attractive option. There's no monthly fee as long as you're enrolled in school, and no minimum balance. Plus, all of the Citibank services on regular checking accounts come standard.
Citibank also rewards its affluent customers considerably for maintaining large accounts with the "Citigold" program. Aimed at high net worth clients, the program offers incentives for having a credit card, checking account, investments and loans through Citibank. Interest bearing checking, a private customer service line and even discounts on mortgage products await those who choose to park significant wealth with the Citigold program. Honestly, the dedicated customer service line alone probably attracts customers, as anyone who has had to deal with voice recognition software knows.
CitiConcerns
Citi's troubles are far from over despite continued efforts to strengthen the company. While the bank has taken bold steps to reorganize and regain the trust of consumers, the lawsuits continue. Former bondholders filed a lawsuit against Citi for alleged failure to disclose distressed mortgage holdings. Citigroup has had a tough time regaining its footing, and has posted losses the last few quarters. The biggest hurdle Citi faces, though, is regaining the trust of American consumers. The banking giant certainly has the products needed to recruit new customers, but maintaining high ethical standards will be the key for maintaining a spot as one of the "Big Four".