BusinessWeek interviewed former Citigroup Inc. (NYSE: C) CEO Sandy Weill about a range of topics regarding Citi's performance and prospects as well as its efforts to raise capital. He defends the complex business structure he created and declines to reveal how much he invested in its latest round.
After reading the interview, I get the impression that he still wields tremendous power over Citigroup and that it could be stuck with its current corporate strategy until Weill departs from the scene. His defense of the current corporate strategy is not compelling, at least not to me. Arguing against breaking up Citi, he says, "One of the advantages of the company is that it is in 100-plus different countries and has diversity in income streams."
He continued by defending the merits of this diversification. "Since the merger of Citi and Travelers in 1998, we've had a big corporate business and we've had a big consumer business. We've watched times when the consumer business did poorly and the corporate business did very well. Now, we're watching a time where the global consumer business has done well, whereas the U.S. consumer business has had to add to loan loss reserves. Over time, they balance out."
What's wrong with Weill's defense? Companies that win in their industries and earn superior returns focus on a few things and do them well. Goldman Sachs Group (NYSE: GS) is a case in point. But while Citi participates in just about every financial services market segment, it's not really outstanding in any of them.
For Citi to restore its earnings power, it needs to cut back from industries where it has weak to mediocre performance and prospects and invest in the other segments where it's relatively strong. But after reading the Weill interview, I am confident that won't happen as long as he has a say in its future.
Peter Cohan is president of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He owns Citigroup shares and has no financial interest in Goldman Sachs.
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Reader Comments (Page 1 of 1)
1-16-2008 @ 2:08PM
David Huston said...
Nonetheless, Citi did very well while Weill was there, and very badly since his departure. To me, it's reassuring that he's jumped back in on the investment side.
1-17-2008 @ 11:15PM
Ceesaxp said...
Citi was doing well under Weil, partly because Citi was doing well before 1998 merger. What Weil has bought in 1998 was a safety harbor for IB part of Travelers'.