Citicorp: Not very American

July 17, 2009

Beyond a vague notion that Citicorp is the “good bank” and Citi Holdings is the “bad bank”, I’ve been a little unclear on exactly where Citi is going with this cleavage. But today’s quarterly report is helpful in that it gives not only the Q2 2009 numbers for Citicorp, but also the Q2 2008 numbers. That helps us see how the good bank is structured, especially as regards its geographical balance. And the result might be surprising: North America is much less important to Citicorp than you might think.

Citicorp shares its revenues between two big buckets: “Regional Consumer Banking” (retail banking) and “Institutional Clients Group” (wholesale banking). On the retail side, North America accounts for 31% of the revenues and none of the profits; Latin America, by contrast, is 32% of the revenues and 32% of the profits, while Asia accounts for 29% of the revenues and a whopping 125% of the profits. The small EMEA group is troubled: it had revenues of just $394 million in the quarter, but still contrived to lose $110 million.

On the wholesale side, there’s another pair of buckets: “Securities and Banking”, which is self-explanatory, and “Transaction Services”, which is the boring (but extremely profitable) back-office stuff. On the banking side, Asia once again is punching well above its weight, with 20% of the revenues but 32% of the profits. North America had 28% of the revenues, but didn’t manage to make any money.

If you add all the line items together, North America had 29% of Citicorp’s revenues, and 5.5% of its profits.

I’m all in favor of geographical diversification, but this looks almost as though Citi is giving up on the US. JP Morgan and Goldman Sachs have shown that there are billions of dollars to be made in this country, but North American profits at Citicorp totaled just $169 million, of which $181 million came from Transaction Services.

When Citi lost Wachovia to Wells Fargo, that was pretty much the end, I think, of its ambition to be a major consumer bank in the US. There are three big retail banks in America now: Bank of America, Chase, and Wells Fargo. Citibank, while enormous globally, is a distant fourth domestically. And it seems as though Citigroup is positioning Citicorp similarly. That’s in line with Citicorp’s heritage: Citi was always concentrated overseas before it was bought by Sandy Weill. And the departing CEO of Citibank NA, Bill Rhodes, is the epitome of globe-trotting Davos Man: it’s not easy to imagine him talking about branch strategy in west Texas. And in general you’re much more likely to find a Citibank in some dusty foreign capital than you are in any US flyover state.

Citigroup is based in the US, of course, and the US government is its largest shareholder. But if its plan to divest itself of Citi Holdings ever happens, the remaining company won’t be particularly American.


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