Citicorp Plans To Consolidate Brokerage Units

Citicorp is planning to merge its three retail brokerage units to eliminate administrative overlap and customer confusion, a bank official said.

The likely reorganization comes amid rumbles of problems at the main brokerage unit, Citicorp Select Investments.

It also comes as Citibank is pushing hard to sell mutual funds and other securities products to customers unhappy with low rates on certificates of deposit and other traditional products.

Unit Said to Be Disorganized

Citicorp Select Investments resides in the company's strong credit card division. But industry sources say the broker-dealer is disorganized and has created dissension at rival units that sell mutual funds and annuities.

CSI, as it is known, was set up two years ago as a national full-service brokerage. Its aim was to provide the bank with hefty fees from the sale of mutual funds, annuities, and financial planning services. It employs 60 brokers and pitches its products primarily to Citibank credit card holders and branch customers.

To a large extent, that is the same strategy as the two other retail broker-dealers - Citicorp Financial Services Inc., a subsidiary of Citibank that began life as a discount broker and now has full brokerage powers, and Citi Brokerage, a full-service broker based in Arizona.

Private Bank Offerings

To further complicate the overlap, one of the fastest-growing areas of retail product sales at Citicorp resides in the private bank of its flagship, Citibank.

About 140 brokers from the unit hawk proprietary mutual funds and annuities to customers at many metropolitan New York branches. The profitable business was brought in-house earlier this year by transferring employees of a third-party broker, Landmark Financial Services, to Citi's payroll.

CSI and the two other broker-dealers sell products sponsored by a variety of vendors.

When the planned reorganization is over, Citicorp will have one retail broker-dealer and the separate system of brokers selling Citibank products in the New York branches.

Cost-Cutting Motive Denied

A Citicorp spokeswoman asserted that CSI's major function is to provide products and support to the bank's branches. Indeed, the New York brokers use investment research generated by CSI.

Bank officials maintain that the consolidation is a simple matter of housekeeping, unrelated to Citicorp's dramatic program to eliminate $1.7 billion of costs by the end of next year.

However, sources said that a few positions at Citicorp Select Investments, which is believed to employ about 250 people, have already been pared.

Citicorp officials would not comment on staff size.

"All the purposes of the corporation can be served by one [broker]," said Raymond Quinlan, vice president and head of Citicorp Select Investments.

Much internal carping, however, has been directed at CSI, which is viewed as a favorite child because of its connection to the once free-spending credit card division.

For example, CSI employs about 200 people simply for training, product development, and back-office operations, according to an industry source. The other brokerage units are much leaner, and some are believed to be converting to the CSI administrative systems.

Brokers Sent to Branches

Mr. Quinlan is quick to say the brokerages and branches are working together without conflict. "It's not a competitive situation," he said.

CSI brokers are now being hired for Citi's branch systems in Chicago and Florida. The Chicago branches previously used Landmark brokers, while Florida has been without an investment program for two years.

But in February, when Citibank's Washington, D.C., bank was converted from a third-party investment program to CSI, sparks flew.

CSI has a rigid investment plan that calls for brokers to offer recommended products, a strategy that may conflict with advice branch representatives have given their customers. One investment counselor in Washington was fined for not using the CSI model, said a mutual fund executive who insisted on anonymity.

"Change is difficult," Mr. Quinlan said, though he refused to comment on the Washington incident specifically.

The mutual fund executive had harsher words. "It's like slapping training wheels on a motor bike," he said.

Despite the clashes, Citicorp's investment programs have been growing. Sales of mutual fund investments at branches jumped 59% since yearend to over $2 billion in assets. In the past nine months Citibank vaulted to 7th place from 10th place among all banks, according to Lipper Analytical Services Inc.

Mr. Quinlan said he expects revenues from product sales at CSI to range from $50 million to $100 million in 1992, a healthy program by bank standards. One industry source said the figure sounded high and may include results of the New York branches.

To supplement in-bank sales, CSI has experimented with free-standing offices in Minneapolis, Los Angeles, and Rochester, N.Y. But Mr. Quinlan said: "We don't want to overexpand. We deliberately restrained growth over the first year."

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