Citi Chief Rejects Calls for Bank Splits

Citigroup’s chief executive has knocked back the idea of big banks being split up after calls from people such as his predecessor Sandy Weill.

Vikram Pandit
Vikram Pandit

Vikram Pandit said Citi , formed in Mr. Weill’s time with mergers such as the acquisition of Travelers in 1998, had already gone back to the basics of banking, and aside from some global markets businesses had sold most of the units from that deal.

“What’s left here is essentially the old Citicorp,” he told the Financial Times. “That’s a tried and proven strategy. Why did it work? Because it was a strategy based upon operating the business and serving clients and not a strategy based on dealmaking. That’s the fundamental difference.”

The transformative Citi purchases helped end the Glass-Steagall separation of retail and investment banks in the US.

Under Mr. Pandit the bank has been pushing through the sale of $600 billion in assets, and 60 different businesses.

Mr. Pandit said Citigroup was now set to glean the majority of its business from emerging markets, with Asian and Latin American consumers and trade between those regions and Africa driving growth.

He said Citi took almost 50 per cent of its business from emerging markets and it was “banking on the fact that the growth story is intact” for Asia and the southern hemisphere broadly, despite the slowdown in China.

Citigroup’s hopes for emerging markets growth come as it continues to clean up the non-core assets held in its Citi Holdings unit, which have brought almost $2 billion of losses so far this year, compared with $5.9 billion of first-half profits for the group overall. It also faces a potential charge on the value of its stake in its brokerage joint venture with Morgan Stanley depending on the outcome of a third-party valuation due this month.

Citigroup likes to point out that in some periods, such as the recent second quarter, profits in Asia alone have outstripped the global earnings of pure investment banks such as Morgan Stanley and Goldman Sachs .

The bank has continued its push in China, where it has just launched a securities joint venture with Orient Securities in Shanghai and is about to issue the first own-brand credit card from a global bank. BEA of Hong Kong is the only other non-Chinese bank allowed to issue credit cards.

Mr. Pandit said the emergence of new corporate champions outside the developed world and their trade and investment in other emerging markets was likely to lead to the bank seeing the share of its business from emerging markets increase from near 50 per cent, where it stands currently, to become the majority.

“When you look at our business, the biggest growth trend is in our ability and our requirement to serve those emerging-market multinationals in the way we used to serve and continue to serve some of the developed-market multinationals,” he said.