If diversification helps a company weather financial storms, surely this is the time to be diversified.

Citicorp and Travelers Group will put that idea to a grand test when they close their merger today and form Citigroup, a $747 billion-asset, globe-girdling company active in everything from savings accounts and credit cards to insurance, brokerage, and investment banking.

Bankers and analysts are watching closely to see how this extraordinary lineup of businesses responds to the current turmoil in world financial markets.

The verdict so far: Citigroup is buffered-but only to a point.

Over the past several weeks both Citicorp and Travelers have taken some real lumps in capital markets and corporate banking. Citicorp said it would take a $100 million hit for the third quarter from emerging markets trading losses. Similarly, Travelers' Salomon Smith Barney unit reported $360 million in trading losses.

At the same time other parts of the two companies have been turning in solid performances. The combined consumer finance and asset management businesses, for example, are expected to post markedly increased earnings for the third quarter.

Those gains, however, have not been enough to shield total earnings from the global upheaval. Citigroup, on a pro forma basis, is likely to show third-quarter earnings of $1.045 billion, down 49% from the previous quarter, according Judah S. Kraushaar, a banking analyst at Merrill Lynch & Co. That performance is only slightly better than 51% decline that Merrill estimates for money-center banks as a group.

For next year, Merrill is betting on a 33% gain for Citigroup's earnings, versus 29% for all money-centers.

While Citigroup may not break away from the pack, many observers see clear benefits in the company's heft and scope of activities.

"In the choppy seas we're in, I would rather be on a big ocean liner than a small boat," said David Berry, director of research at Keefe, Bruyette & Woods Inc.

Citigroup, based in New York, boasts 100 million customers in 100 countries. It has 161,000 employees working out of 3,200 offices worldwide. Its product list ranges from life insurance and equity underwriting in the United States to credit cards and commercial loans in emerging markets.

The deal, announced in April, startled the industry, challenged existing banking laws, and intensified a debate about the prospects for effective cross-selling in financial services.

The merger, the largest ever in financial services, was initially valued at $70 billion. Steep declines in the share prices of both companies since then have hammered the price to $48 billion.

The dramatic changes in market condition could touch off some big shifts in Citigroup's strategy over the next year, analysts suggest.

Initially, the most promising part of the merger was thought to be the combination of Salomon Smith Barney with Citicorp's commercial banking businesses. Now, however, the company may turn its hopes to its consumer operations, analysts said.

Indeed, while market-sensitive businesses will show a short-term drop in earnings potential, Citigroup's other half-insurance, consumer finance, credit cards, and deposit and private banking services-is poised for growth, analysts said.

The companies began some cross-marketing pilots in consumer businesses during the summer. For example, Citi Visa cardholders interested in insurance were linked to Travelers' insurance sales force through Citi's call center. And sales representatives at Travelers' Primerica Financial Services began training to spot appropriate candidates for Citi's banking products, analysts said.

These consumer businesses generally face bright prospects. Mr. Kraushaar of Merrill Lynch said Travelers' insurance operations, particularly its life company, are showing strong sales, its consumer finance operations are showing "renewed vigor," and Citi's credit card business shows signs of "improved momentum."

For the rest of this year "less of the earnings will come from corporate banking, and more will come from consumer," Mr. Berry said.

This ability to draw strength from one business while another is in decline should help Citigroup in the years ahead, observers said.

"A company that operates across all business lines mitigates the circumstances of one of those businesses going bad," said Tanya Azarchs, a debt analyst at Standard & Poor's Corp. "Diversity means stability."

Observers also pointed to Citigroup's hulking capital base-$90 billion as of Wednesday-as a reason why the company will be better able to ride out market volatility.

While smaller companies might struggle to reinvest in their businesses, Citigroup will clearly have the resources, even when some of its business are in decline, consultants said.

"They are putting together an organization for the next century," said Edward Furash, chairman of Furash & Co., a consulting firm in Washington. "A large capital base and funding mechanism will put them in a good position to compete in tomorrow's global financial marketplace."

Over the long run, "one part will always go badly versus another," said Charles Wendel, president of Financial Institutions Consulting, New York. "You have to look at the long-term strategy.'

As revenue growth slows, Citigroup also will be able to turn to cost cutting, analysts said.

Reflecting the effects of market trouble as well as the potential for merger-related cost savings, Citigroup expects to lay off 8,000 employees, or 5% of its work force, by yearend.

"Do I think they will weather the storm? Yes," said Steven Eisman, an analyst at CIBC Oppenheimer. "But it's going to be a tsunami. Diversity helps."

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