Citigroup

The following entry is the one originally submitted by the contributors. The previous version of this entry that appeared in the original printing of the encyclopedia was not the one submitted by the contributors and was mistakenly used by the Publisher. The entry was written by Drs. Efthimios Poulis and Konstantinos Poulis, and the Publisher apologizes for submitting the wrong version of this entry for publication.

Citigroup is one of the most diversified financial services company in the world. It was incorporated in 1998 through a merger between Citicorp and Travelers Group. It operates globally and has established competitive advantage in its global presence, broad distribution, valuable brands, unmatched scale and efficiency, and product breadth. The company operates through five operating segments: global consumer, corporate and investment banking, global wealth management, and alternate investments.

Citigroup gained its global presence by heavily acquiring other organizations, especially in Asia and Latin America. At the same time, Citigroup invested in strategic alliances in order to enter China's emerging credit card market. Citigroup has an asset base of over $1.8 trillion. In 2007, the company was ranked first in Forbes 2,000 global companies and eighth in Fortune 500. Citigroup has more than 200 million customer accounts. Achieving economies of scale provides Citigroup with competitive advantage and allows it to capitalize on opportunities across geographic markets.

Citigroup has invested in increasing its product portfolio and establishing a strong global brand name. Citigroup offers individual and institutional clients with a diversified range of financial products and services. Its customers range from small and medium-size enterprises to fund and securities services as well as government services. This wide range provision of services enhances the company's cross-selling opportunities and increases its resistance to temporary downfall in demand for one product segment or business. Chief Executive Officer Vikram Pandit mentioned that the Citigroup brand is unparalleled in the world. Moreover, Citigroup has managed to achieve economies of scale and scope through people who work with them. It claims to have the single largest pool of talent in the financial services business. Through continuous investment in talent and human capital, Citigroup has managed to expand its operations globally.

Although Citigroup has established a well-recognized global brand name, it has reported a decrease in profits since 2005. The net profit for fiscal year 2006 was $21,538 million, a decrease of 12.4 percent from 2005. Moreover, the company's net profit margins also declined during the same period. The net profit margin declined from 29.4 percent in 2005 to 24 percent in 2006. This decline in operating profits indicates ineffective cost management as well as problematic leadership in the management of operations. Furthermore, a decline of this value restricts availability of resources and prohibits pursuit of growth projects.

Moreover, Citigroup reported a decline in net interest margins. Citigroup's net interest margin in 2006 was 2.65 percent, down 41 basis points from 2005. This decrease in the margins of the group may show declining profitability of the lending business of the company. Net interest margin declined primarily due to a shift in customer liabilities from savings and other demand deposits to certificates of deposit and e-saving accounts. This decrease in net interest margin caused a decline in the group's net interest revenues during fiscal year 2006.

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