Woes at Citicorp's Private Bank

Above-Average Loan Writeoffs Expected Until 1993

Citicorp expects loan problems in its private banking division to remain serious until 1993.

"We have had above average writeoffs in the last year," said David Van Pelt, head of U.S. private banking at Citibank. He would not elaborate, but said he expects the high rate to continue through 1992.

The other major parts of private banking -- including asset management and trust -- are "performing pretty much to plan," Mr. Van Pelt said in a telephone interview.

Citibank has been reluctant to reveal information about credit problems in its huge private banking division, but industry sources said the unit is plagued by loan losses to big borrowers.

Loans to Highfliers

Citibank, like other big lenders, is believed to have made personal loans to some of the same real estate developers and entrepreneurs whose poorly performing commercial credits are bedeviling other parts of the nation's large banks.

Citibank, which manages $60 billion in assets for clients worldwide, would not comment on the size of its lending portfolio in the private bank.

Mr. Van Pelt, who took the reins of domestic private banking earlier this year after a stint as senior corporate officer for Latin America, said he has just completed a reorganization of the division. The changes, announced internally last month and scheduled to take effect on Jan. 1, were intended to create "a leaner, simpler, less hierarchical organization" that focuses on client service and sales.

That coincides with a companywide strategy to cut middle layers of management.

Relationship, Product Units

The private banking changes divide the domestic division into two units -- relationship management, headed by Jack Reilly, and product management, run by William Friesell.

Previously the relationship area, which includes lending and asset management, was segmented into two groups. One served clients with net worth over $10 million and the other was directed at "select" clients who have $1 million to $10 million.

The two groups have now been merged. Insiders and former employees said the former structure was inefficient, with too much time spent on turf decisions.

The new structure will not apply to New York City, which will continue to be segmented into two groups. Leslie Bains will head the decamillionaire group, which has about 2,000 clients. Sue Runne will run the "select client" unit.

Ms. Bains, who joined Citicorp earlier this year to run trusts and estates, said her unit is the biggest revenue producer within the domestic private bank.

Nevertheless, some insiders view the move as a demotion. Ms. Bains, a strong marketer who was head of private banking at Chase Manhattan Corp. before coming to Citi, said her role continues to be significant.

Mr. Van Pelt also said that Stewart B. Clifford will continue to oversee investment management, but will have less direct management responsibility.

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