NEW YORK – Citigroup Inc. (C), the nation's largest financial institution, on Friday announced that it was streamlining its corporate structure so the New York-based bank can be managed more efficiently.
The bank said it was merging its two main bank holding units into the parent company, consolidating capital markets operations and making other moves that appear aimed at simplifying its structure and increasing accountability.
Citigroup treasurer, Guy Whittaker, told analysts in a conference call the changes will improve liquidity, strengthen capital management and make the integration of acquired companies easier to accomplish.
He made no reference to recent scandals in Japan and Germany that have gotten the bank in trouble with foreign regulators.
Citi was forced to close its private bank in Japan last year for ethical lapses, including failure to check properly for possible money laundering operations. In Europe, Citigroup bond traders sought to boost profits by buying large amounts of futures contracts on German government bonds, driving up the price, then selling the bonds on other markets for a quick profit.
Asked about the European scandal, Citi's chief financial officer, Sallie Krawcheck (search), said that Germany's investigation was focused on the individuals involved in the trades and that the bank was cooperating.
She said that the impact on the bank's European business was difficult to quantify, adding: "There is no doubt that if you look at our numbers ... results were not as strong as we would have hoped."
Citi's chief executive officer, Charles O. Prince (search), forced three executives to leave the company after the Japanese scandal and reportedly has been taking disciplinary action against traders involved in the European dealings, according to published reports.
Prince, who is a lawyer, has made "accountability" a theme for the bank since he took over the top operational job at the company from Sanford I. Weill (search) in October 2003. Weill remains chairman.
The changes announced Friday would appear to make many of Citigroup's subsidiaries more directly accountable to top management.
The reorganization, which is subject to regulatory review, is expected to be completed in the third quarter.
The main reorganization announced Friday involves merging Citi's two bank holding companies — entities that operate Citi's banking and credit card operations — into the mother company, Citigroup Inc.
The holding companies — Citicorp and Citigroup Holdings — are legacies of the merger of Citicorp and Travelers Life (search) in 1998 that created Citigroup. Citi announced late last month that it was selling Travelers to MetLife Inc. (MET).
In a second step, Citi said it was creating Citigroup Funding Inc. The subsidiary will issue commercial paper and medium-term notes, the banking company said. Other capital markets funding activities, including issuance of long-term debt, will be handled by Citigroup Inc.
In a third move, Citi is tying its Citigroup Markets Holdings Inc. subsidiary, also known by the acronym CGMHI, closer to the mother company.
The Global Capital Markets Group, which is the division involved in the European trading problems, is part of CGMHI.
Under the restructuring, Citigroup will guarantee the public indebtedness of CGMHI.
"Upon issuance of the guarantee, CGMHI will no longer file periodic reports with the Securities and Exchange Commission and will continue to be rated on the basis of a guarantee of its financial obligations from Citigroup," the statement said.
Citi had more than $1.4 trillion in assets as of the end of 2004, and serves some 200 million customers in more than 100 countries.
Citigroup shares fell 11 cents to $48.87 Friday on the New York Stock Exchange.