Understanding the future of the financial industry is understanding what is going on now.
And where we are coming from.
In 1998 one of the largest mergers in the financial history took place between Citibank and Travelers group.
From a distance that merger looked quite simple between a bank and an insurance company, but both companies were much more complex already at that time.
The new structure was represented by a logo of the bank (Citi) added with the umbrella of the Other (Travelers) on top of the logo.
When it rains at the bank, there is always the insurance umbrella, they must have thought...
It all started like this, in 1998: "Citicorp and Travelers Group said ...
they would merge in the largest corporate combination ever, creating the world's biggest financial-services company and offering banking, insurance and investment operations in 100 countries.
The ...
merger valuing $140 billion (in a stock-swap)...
would make it nearly twice as big as the current record-holder, WorldCom's pending $42 billion offer for MCI Communications.
" ...
give Travelers the ability to market mutual funds and insurance to Citicorp's retail customers while giving the bank access to an expanded client base of investors and insurance buyers..
..
A key goal of the combination...
would be to make investment products such as stocks and bonds available to middle-class customers around the world.
(1) It was the time of possibilities "people want to buy a house, they don't want a mortgage", (cross-selling) opportunities and of the one-stop-shopping concept...
Savers do not want to own mutual funds but want to prepare for retirement as part of an overall plan...
" (International Herald Tribune in 1998) That was than.
Travelers is in business for over 150 years, and "industry leader from the start," reads the website.
Issued the first auto policy in 1897 and continue to lead the way with innovative insurance products, first class service and industry-leading technology.
" In 2003 mytravelers was launched.
Many forget that the internet boom did also change the scene.
Later on we learn that ICT spending at Citigroup was lagging.
In the report of Citigroup over 2007 the CEO mentions a few top priorities: the first is capital allocation.
"This is my top priority, and I am aggressively building a new risk culture at Citi.
We have named a new Chief Risk Officer and I will stay actively involved in strengthening and reshaping our risk philosophy and strategy.
My goal is to have the best risk management in the business, to transform it into a key competitive advantage driving bottom-line results.
" (Vikram Pandit in the annual statement report) Talent is (was) another top priority.
It can decide the difference between failure and success...
" I have appointed a Chief Talent Officer who is mandated to find, track, and deploy the best talent.
Some current and former Citigroup executives place the blame for the firm's troubles on Weill (The CEO from Travelers who started the new structure in 1998).
He refused to spend enough on technology and failed to integrate the new companies he acquired.
(2) According to the same source, CitiFinancial...
didn't have the right and appropriate software to enable the business with (sales).
It was Pandit's initial plan was to complete the integration that was undone.
But too late apparently.
The company was "Massively Inefficient," according to the words of the CEO, who would merge it all:
Many must have seen this change coming (looking at his background in the investment and corporate world) when we entered the board at the end of 2007.
Although people wonder why one of the jewels in the business (Smith Barney) that generate funds is sold.
Perhaps it is not that clear where this is leading to...
What remains, is that the work from 1998 till now, twenty years of organizing is swept away; the original merger between Citicorp and travelers is unraveled.
And where we are coming from.
In 1998 one of the largest mergers in the financial history took place between Citibank and Travelers group.
From a distance that merger looked quite simple between a bank and an insurance company, but both companies were much more complex already at that time.
The new structure was represented by a logo of the bank (Citi) added with the umbrella of the Other (Travelers) on top of the logo.
When it rains at the bank, there is always the insurance umbrella, they must have thought...
It all started like this, in 1998: "Citicorp and Travelers Group said ...
they would merge in the largest corporate combination ever, creating the world's biggest financial-services company and offering banking, insurance and investment operations in 100 countries.
The ...
merger valuing $140 billion (in a stock-swap)...
would make it nearly twice as big as the current record-holder, WorldCom's pending $42 billion offer for MCI Communications.
" ...
give Travelers the ability to market mutual funds and insurance to Citicorp's retail customers while giving the bank access to an expanded client base of investors and insurance buyers..
..
A key goal of the combination...
would be to make investment products such as stocks and bonds available to middle-class customers around the world.
(1) It was the time of possibilities "people want to buy a house, they don't want a mortgage", (cross-selling) opportunities and of the one-stop-shopping concept...
Savers do not want to own mutual funds but want to prepare for retirement as part of an overall plan...
" (International Herald Tribune in 1998) That was than.
Travelers is in business for over 150 years, and "industry leader from the start," reads the website.
Issued the first auto policy in 1897 and continue to lead the way with innovative insurance products, first class service and industry-leading technology.
" In 2003 mytravelers was launched.
Many forget that the internet boom did also change the scene.
Later on we learn that ICT spending at Citigroup was lagging.
In the report of Citigroup over 2007 the CEO mentions a few top priorities: the first is capital allocation.
"This is my top priority, and I am aggressively building a new risk culture at Citi.
We have named a new Chief Risk Officer and I will stay actively involved in strengthening and reshaping our risk philosophy and strategy.
My goal is to have the best risk management in the business, to transform it into a key competitive advantage driving bottom-line results.
" (Vikram Pandit in the annual statement report) Talent is (was) another top priority.
It can decide the difference between failure and success...
" I have appointed a Chief Talent Officer who is mandated to find, track, and deploy the best talent.
Some current and former Citigroup executives place the blame for the firm's troubles on Weill (The CEO from Travelers who started the new structure in 1998).
He refused to spend enough on technology and failed to integrate the new companies he acquired.
(2) According to the same source, CitiFinancial...
didn't have the right and appropriate software to enable the business with (sales).
It was Pandit's initial plan was to complete the integration that was undone.
But too late apparently.
The company was "Massively Inefficient," according to the words of the CEO, who would merge it all:
- Each business its own back office
- 140,000 people in IT and operations.
- 16 database standards.
- 25,000 developers
Many must have seen this change coming (looking at his background in the investment and corporate world) when we entered the board at the end of 2007.
Although people wonder why one of the jewels in the business (Smith Barney) that generate funds is sold.
Perhaps it is not that clear where this is leading to...
What remains, is that the work from 1998 till now, twenty years of organizing is swept away; the original merger between Citicorp and travelers is unraveled.