The New Citigroup Isn’t Your Father’s Citicorp

Vikram S. Pandit, Citigroup‘s chief executive, has entered the debate over splitting up big banks. But did he overstate one of his key points?

For supporters of separating investment banking activities from more traditional banking businesses, Citigroup makes an attractive target. At the bank, Wall Street and Main Street businesses were brought under the same roof through a series of over ambitious mergers.

Citigroup entered the financial crisis as a huge, highly complex institution that ended up needing a bigger bailout than any other bank. It has since struggled to regain its footing, not to mention the favor of shareholders. Then, last month, none other than Sanford I. Weill, the executive who cobbled together the Citigroup colossus, called for big banks to be broken up.

Mr. Pandit’s defense is that Citigroup has streamlined and refocused, and is no longer the unwieldy giant it once was. Instead, it is much more like Citicorp, the entity that Mr. Weill merged with Travelers in 1998 to form Citigroup.

“What’s left here is essentially the old Citicorp,” he told The Financial Times for an article on Monday.

Citigroup still has an entity called Citicorp, which today comprises the businesses that the bank still wants to pursue and in which it feels it has a competitive advantage. Citigroup’s “unwanted” businesses and assets, many of which got the bank into hot water, are housed in an entity called Citi Holdings that is meant to be decreased in size over time.

Mr. Pandit’s point is that we should think of Citigroup as being much like the old Citicorp.

That may be a stretch in at least one important area. Today’s Citicorp looks to be much more reliant on often volatile Wall Street businesses than the old one, and it has a huge presence in global capital markets. The Wall Street-focused operations within today’s Citicorp had $912 billion of average assets in the second quarter of this year. That is only marginally behind the $952 billion at Goldman Sachs, the largest investment bank in the United States. JPMorgan Chase‘s investment bank trailed far behind Citicorp’s, with $841 billion of average assets in the second quarter.

The modern Citicorp’s emphasis can be seen in other metrics. In 1998, Citicorp’s trading revenue was 8 percent of its total revenue. By contrast, trading revenue last year accounted for 23 percent of the Citicorp unit’s total.

The old Citicorp was still filing an annual report in 2004. In that document, it broke out revenue for a group of businesses that included Wall Street activities. This “capital markets and banking” segment accounted for 13 percent of Citicorp’s total revenue in 2004. Today’s Citicorp unit has similar businesses grouped together under the title “securities and banking.” That group generated a third of the Citicorp unit’s revenue last year.

“Citi has returned to the basics of banking and has streamlined our business around our core areas of strength – global institutional and consumer banking – with a clear structure and a clear strategy,” Shannon Bell, a Citigroup spokeswoman, said in an e-mail.