Competition in the CitiGroup era

Global Finance, May 1998 by Kahn, Sharon

On Friday April 3 the Citibank PR person canceled my interview with vice chairman Onno Ruding. He would be in an important meeting for the rest of the daycould I do a phone interview over the weekend instead?

On Saturday we talked about a wide range of topics. When I asked if Citibank envisioned mergers on the horizon, Ruding said: "None that will make headlines." When I asked about Citibank moving into insurance, Ruding noted that "unless Congress breaks down the fire walls between banking and insurance," he saw no future for Citibank in underwriting insurance. Since the interview wasn't face-to-face, I couldn't tell if Ruding was smiling.

On Monday April 6 Citicorp and Travelers Group announced their proposed merger. At least I learned why Ruding was too busy to meet with me on Friday.

Needless to say, we got back to Citibank, and Ruding amended his quotes. (His comments, which, incidentally, are fascinating, are on page 29.) Citicorp and Travelers may intend to create the world's largest universal bank, but we did not alter the chart accompanying "The Future of Global Banks." We put Citibank at the top of the global commercial banking heap and Salomon Smith Barney midway through the investment banking pack, but ignored the possibility of Citigroup as a global universal bank, because frankly, there's a chance the merger won't go through. There's the much anticipated clash of egos between CEOs John Reed of Citicorp and Sandy Weill of Travelers. Then there are those pesky fire walls Ruding alluded to. Even if you are Citicorp and Travelers, that's some obstacle to overcome.

But banking customers will benefit if the merger does go through. Rather than reduce rivalries, this merger will spur competition. With Citigroup's name, capital, distribution channels, and management skills behind it, Salomon can finally challenge Merrill Lynch, Morgan Stanley, and Goldman Sachs for a tier-1 spot among global investment banks. Chase Manhattan will have to guard its heretofore unchallenged position in syndicated loans underwriting. Citigroup undoubtedly will go after these areas with a vengeance, competing with both price and innovation. Such competition can only benefit corporations.