Citi Offers Global Launch Pad for Travelers Products

Travelers Group chief executive officer Sanford I. Weill spoke somewhat longingly last year about international ambitions. With the Citicorp merger he would fulfill them in spades.

"We live in a global economy," he said in a December interview with American Banker. "We live in a period where trade will increase and savings and investment will increase" outside the United States.

But Travelers Group has been domestically focused. Citicorp would bring an unparalleled infrastructure-3,000 offices in 98 countries-and what may be the most widely recognized brand name in the financial services industry.

"In the U.S, Citicorp benefits a lot from Travelers and its mix of products," said international banking consultant Andre Cappon, president of CBM Group, New York."But outside the U.S., Travelers benefits more from Citicorp."

This is not to say that Travelers has nothing to bring to the table internationally. It generates 14% of its sales outside this country, with products ranging from Salomon Smith Barney's equity underwriting and sales and trading services to insurance policies carrying the Travelers name.

These offerings would help fill out Citicorp's menu, which is highly commercial-bank-oriented.

The big challenge for Citigroup would be how to put Travelers' vast product line through Citicorp's distribution network outside the United States. (Last year the bank generated 55% of its revenue abroad.)

The hope is that customers all over the world would turn to Citigroup for a variety of financial services.

For the one-stop shop to work, employees would need incentives to cross- sell the products of separate units within the Citigroup empire.

"People have tried to build financial supermarkets before," said Tsukasa Ojima, senior manager in corporate planning at Sanwa Bank Ltd. of Tokyo. "What is the guarantee it will work this time?"

The historical odds go against the broad financial services strategy. Two British banks, Barclays and National Westminster, have gotten out of the securities business.

American Express Co. and Sears, Roebuck and Co. retreated from highly touted financial-supermarket efforts in the 1980s.

"The actual issue is execution and making it go," said David Berry, director of research with New York-based Keefe, Bruyette & Woods.

Mr. Berry said the "immediate opportunities" for sales synergies are in the domestic market, where Travelers' insurance and securities distribution networks are concentrated.

"To the extent that you can export it overseas, that's the ultimate opportunity," Mr. Berry said.

Until the companies spell out their plans more clearly, observers can only guess how Citigroup would come together.

"They might not merge in the sense we are thinking," said consultant Gary Kleiman, senior partner of Kleiman International Associates, Washington. "They might exist on parallel tracks. Perhaps there will be Salomon people in Citicorp offices."

"I will assume," said Charles Farkas, a managing director for global financial services for Bain & Co., Boston, "that they will provide a simple incentive to sell each other's products. If you come up with a simple plan, you can achieve synergies quickly."

James R. Kraus contributed to this article.

For reprint and licensing requests for this article, click here.
MORE FROM AMERICAN BANKER