C Overview - by Better Trades

As one of the major financial service companies in the U.S. and internationally, Citigroup Inc. (C) was the offspring of one of the largest mergers in history, combining the banking giant Citicorp and the financial conglomerate Travelers Group. Doing business as Citi, the company provides the world's largest financial network offering a wide range of financial services and products throughout the globe.

Operating in more than 107 countries, with nearly 12,000 offices worldwide, Citi holds more than 200 million customer accounts, while employing more than 300,000 people. In terms of revenues, Citi was the leading bank in 2008 and was the leading dealer in U.S. Treasury securities.

Citigroup was formed in October 1998 in a $140 billion merger, thus becoming the world's largest financial services organization with more than $700 billion in assets. Leading up to the merger, Citicorp was doing business mainly as a multinational banking corporation with operations in more than 100 countries. Meanwhile, Travelers Group was working primarily in credit services, consumer finance, and insurance and as a brokerage.

Although the deal was technically a merger, the agreement resembled more of a stock swap. At the time, Travelers purchased all Citigroup stock shares for $70 billion, and then reissued 2.5 shares for every Citigroup share owned.

A catch to the merger was the Glass-Steagall Act, which when enacted in 1933, forbade financial institutions, i.e. banks, to merge with insurance underwriters. This meant that Citigroup had to divest Travelers' prohibited assets within the next five years. In 2002, the company spun off its Travelers Property and Casualty insurance underwriting business, with dire consequences to Citi's stock price.

Citicorp was originally founded in June 1812 as the City Bank of New York with working capital of just over $2 million. Leading up to 1976, when the company changed its name ultimately to Citicorp, the company had gone through several other names, including the National City Bank of New York, First National City Bank of New York and then shortened to First National City Bank in 1962.

Nowadays, Citigroup currently operates through four business segments, Global Cards, Consumer Banking, Institutional Clients Group, and Global Wealth Management.

Within the Global Cards segment, the company is a global issuer of credit cards through the MasterCard, Visa, Diners Club, Private Label and American Express card products. However, in June 2008, Citigroup completed the sale of Diners Club International (DCI) to Discover Financial Services (DFS). Discover Financial currently operates the Discover Card with more than fifty million card members.

As for the Consumer Banking segment, it entails operations of a global, full-service consumer franchise regarding retail banking, consumer finance, real estate lending, and small and middle market commercial banking. This segment also involves practices that provide personal and auto loans, student loans, investment services, and Primerica financial services through a network of local branches, offices and electronic delivery systems. By the end of 2008, Citigroup operated 7,730 branches within the Consumer Banking segment.

Citi's Institutional Clients Group is the business that is involved in various banking and securities activities encompassing private equity, investment banking, hedge funds, real estate, debt and equity, lending, structured products, and managed funds.

The Institutional Clients Group also offers transaction services, including trade services, clearing services, cash management services, agency and trust services, custody and fund services, and research for equity and fixed income services.

The Global Wealth Management segment provides financial planning, brokerage, advisory, and wealth management services. With operations in North America, Latin America, Asia, Europe, the Middle East, and Africa, the Global Wealth Management segment is composed of the Citigroup Private Bank. This segment did contain the Smith Barney Private Client business, which provided investment advice, financial planning and brokerage services to individuals, companies and non-profit organizations.

However, in early January 2009, Citigroup announced they have reached a definitive agreement to combine Morgan Stanley's (MS) Global Wealth Management Group and Citi's Smith Barney. Under terms of the agreement, Citi will exchange 100% of its Smith Barney units for a 49% stake in the joint venture and an upfront cash payment of $2.7 billion.

Also in January of this year, Citi announced company realignment for management and reporting purposes to be designated into two businesses. The first being Citicorp, primarily comprised of the Company's Global Institutional Bank and the Company's international regional consumer banks. The second being Citi Holdings, primarily comprised of the company's brokerage and asset management business and the domestic consumer finance business.

Of recent, Citigroup made headlines in late 2008 that the government was lending aid to the distressed financial company, to the tune of $25 billion, which was allocated in October of last year. the following month, the government agreed to add an additional $20 billion worth of rescue funds to the bank, as the Treasury Department, the Federal Reserve and the FDIC will cover 90% of the company's losses on its $335 billion portfolio.

The aforementioned deal only takes effect when Citigroup absorbs the first $29 billion in losses. In exchange for the government's bailout, Citigroup will then give the federal government $27 billion worth of Citi's preferred shares and warrants to acquire the stock.

Within the financial sector, Citigroup has several well-known competitors including Bank of America Corp. (BAC), JPMorgan Chase & Co. (JPM), Credit Suisse Group (CS), Deutsche Bank AG (DB), UBS AG (UBS) and Mizuho Financial Group Inc. (MFG).

By Better Trades