What’s wrong with Citibank?
The bellwether US bank has lost almost 70% of its market cap over the past year. The $2.2 trillion bank is at the epicenter of the sub-prime debacle and has written off $55 billion in bad debts so far.
It wasn’t supposed to be this way. When Sandy Weill pulled together a world-class investment bank, insurance company, wealth management group, and a commercial and international bank, the diverse product lines were supposed to support each other. But the synergies of working with colleagues across town seems to have intensified the risk, not reduced it.
Another problem is the failure of the Universal Bank. The idea was to have one-stop-shopping for all your financial needs. But with the internet and with bankers more mobile than ever, people can let the bank come to them. Citi has 10 years of mediocre performance to prove at least that the model isn’t a slam dunk.
With over half of the bank’s earnings coming from consumers, the bank’s destiny really rests with the fate of the economy. When you have to look outside for recovery, that’s not a good thing.
Douglas R. Tengdin, CFA
Chief Investment Officer
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