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Citigroup to Abandon Role As Financial Supermarket
Citigroup CEO Vikram Pandit plans to announce in the coming days a major shift away from the "financial supermarket" model that has guided the bank for the last decade.
The development comes as Citigroup and Morgan Stanley work toward an agreement creating a joint venture of Citi's Smith Barney brokerage unit, which sources say could be announced after today's closing bell.
The deal would provide a capital boost for Citigroup. But it will also be the first step toward the breakup of the massive investment bank, which is under pressure to raise capital to stem losses.
The eventual breakup of the supermarket model—in which a bank handled a client's every financial need, from investing to insurance—would mean that Citigroup would become more of a traditional bank like JP Morgan Chase.
The core of the remaining company would be a global wholesale bank with some investment banking capability and include private and regional banking.
Does not bode well for Manhattan real estate. Morgan Stanley Smith Barney will lay off thousands of back office and support staff, and nonperforming brokers. Citi, now merely the 3rd largest bank in the country, will fall further down the ranks. That leaves only JPM as a major force in international banking based in New York.
Charlotte will be the US capital of finance.
And JPM moved up its earnings announcement. Watch for it to raise further capital to digest WaMu.
Steve, Charlotte is not going to be the US capital of finance no matter how many times you post it. It is far more likely that once the economy stabilizes there are going to be a good number of boutique investment firms started by those very same people that you think will all be moving down to Charlotte. This is an opportunity for smart people who have been extremely successful throughout their careers to make a lot of money. Boutique firms can take more risk than bank holding companies and they will make more money becasue they won't have as many mouths to feed as the larger, more established firms. This si precisely what has happened in the past when large firms go under or merge. They open the door for other firms.
Great article, steve. It supports what I've been saying all along, that wealth and talent are leaving NYC In droves. NYC is no longer relevant, financially, culturally, or socially.
11 minutes ago
ignore this person
Great article, steve. It supports what I've been saying all along, that wealth and talent are leaving NYC In droves. NYC is no longer relevant, financially, culturally, or socially.
LOL. Well, if that's the case Chicago hasn't been relevant since Al Capone went to jail like 80 years ago.
"Boutique firms can take more risk than bank holding companies"
Actually no, waverly, you know not what you speak. Boutique firms require FUNDING, as do (the soon-to-be-regulated) hedge funds. Banks get funding from DEPOSITS, which boutique firms do not have. Therefore, they rely on leverage, which they have to obtain from somewhere.
The reason why GS and MS converted to commercial banks was to attract deposits. Deposits are gathered by retail banks. Retail banking is now headquartered in Charlotte (BofA) and San Francisco (Wells Fargo), with only one major player left in NY: JPM.
Watch US Bancorp move up the ladder to be the #4 bank in the country soon (not headquartered in NYC).
This last bubble investment banks created - the housing bubble - was so massive and so illiquid, that it destroyed the industry.
Then - one more thing you don't realize - retail banking is a commodity business that does not pay huge bonuses. The way they make money is by volume and low costs. Why do you think you see all the dissent at Merrill right now? Because the good old days are gone forever.
And look at the new terms for the TARP.
Moreover, the very definition of "boutique" means they are small. Are you postulating tens of thousands of them?
I have rufus on ignore, so I didn't know what he said.
Chicago ceased being a financial center when Continental Illinois collapsed with Penn Central and Bank of America bought them out. Its other major bank is LaSalle, also owned by....
BANK OF AMERICA!
It has the Mercantile Exchange, but no reason that has to stay there, either.
First of all, Rufus agrees with you, so that alone should give you pause.
Second, NYC doesn't need tens of thousands of firms, although your condescending attitude is so appreciated. If a few dozen firms were started that would be a good chunk of jobs created and they would continue to grow and create jobs within their firms plus the jobs created by the firms associated with them.
Third, you know less on this topic than you think. I know several very qualified people who are aleady engaged in talks to start firms.
steve, I have rufus on ignore as well. So ignore him. No need to even acknowledge the "C" word.
As for the discussion above, I'm leaning with waverly on this one. Did you see the article I posted a couple days ago? All is not well with the retail / investment bank mergers. Many talented folks will leave and that will result in a number of small to mid-sized boutique shops. Tens of thousands is a bit absurd, but I think there are many other possibilities to consider besides Charlotte becoming the investment banking capital of the world.
This article is spot on. I mean, New York wasn't a financial center at all until "Citigroup" was put together.
JM I have no question that there will be "some" firms created, but not nearly enough to generate the jobs and the wealth that have been generated here over the past ten years. That's my point.
Then there's the question of the future shape of the financial industry. All we know right now is that we don't know what it will look like except it will be unlike anything we've ever seen before. There is huge risk in having 3 large national banks controlling nearly 50% of the market. That means that regulation will be very tight, and if regulation of those entities is tight, it will be for others, as well.
Don't expect that the Madoff scandal won't affect hedge funds even though his was not a hedge fund per se. The cowboy days of finance are over.
"your condescending attitude is so appreciated"
There was no condescending attitude - hundreds of thousands of jobs are being lost in NYC. It would take tens of thousands of boutique firms to replace them if they are, in fact, "boutique."
"there are many other possibilities to consider besides Charlotte becoming the investment banking capital of the world"
The power is there, San Francisco, and here. NYC is not the center anymore. When I worked for BofA it was based in San Francisco and was the largest bank in the world. It had about $100 billion in assets. The new BofA has $3 trillion in assets. It's massive.
Citigroup is one of the largest firms in the city. I don't think it will survive as a major bank. The next thing it will have to sell is its Mexican operations, where it owns the largest bank in the country. I bet HSBC might want to get their hands on that.
"JM I have no question that there will be "some" firms created, but not nearly enough to generate the jobs and the wealth that have been generated here over the past ten years. That's my point."
Steve, I think that's an assessment most of us are on board with, but I wouldn't equate that to the "death of New York as a banking center." Mostly though, I think you're right - finance will play an important role here, but it won't be all about Wall St, though I think London, Hong Kong, etc. were already making that point clear before this situation.
There is also the potential for pieces of the larger firms to be sold to smaller entities or broken off entirely going forward. There could be, in a sense, some "turning back the clock" for firms that had been gobbled up in the last 10 years...a mulligan of sorts. Either way, I know from speaking with people that there is a strong desire to remain in NYC and to use this as an opportunity to develop new firms.
You are right when you say that we don't know what the future will look like exactly, but if you are writing the obit for NYC I think that you may want to see a bit more evidence before you pronounce it dead. NYC still has a pulse and the last time I checked....yep....firms were still here.
Steve. What are your thoughts on the common share value of BAC looking out 5 years or more. Would you suggest holding the stock, or just dumping it.
bjw - I agree with you that globalization and technology was changing the landscape regardless of the market going forward. I think it will change, but NYC will still be significant. Of course, it would help things if we woke up tomorrow and the economy was better, but since that isn't going to happen we will see how it evolves over the next 12-18 months and have a much clearer picture then.
What is stevejhx's obsession with Charlotte?
Because BofA is based there? They are also finishing completion of a massive officer tower in Times Square. BofA has always strived for a NY influence.
I think stevejhx's OCD hype decline of NYC as a financial center is loosing pace and his few believers are even doubting his rhetoric.
How can Charlotte be an international center of banking when Charlotte Douglas Int'l Airport only has 2 international carriers, and 1 of them is Air Canada. They are hardly an international destination by any interpretation. Sounds like stevejhx has some serious burns from corporate America and has hasn't gotten over them yet.
oldbuyers, we've gone through that argument before.
mh23, I made my first money in my 20's buying BAC when it was $10, sold it for over $100 a few years later. I would be a buyer, but not quite yet.
"death of New York as a banking center."
Maybe I should have said "THE banking center." There are now 3 poles - SF, Charlotte, NY - which we've never seen before. The closest it got was when BofA and Wells were both headquartered in SF, a decade ago.
C was always the international bank, now they're not going to be.
There will of course be financial services here, but the old gray mare ain't what she used to be.
on with stevejhx... on this again... one of the reasons that NYC finance people are leaving in droves is... drum roll please .... the f'ning RE prices are unbearable... even with the recent downturn... Most finance people get married and have kids... and it's all cool to live in a f'n studio, but it gets crowded trying to make wooopeeee next to a sleeping 8 month old.. .so you gotz to pony up for 2bdrm and when you have one, you gotta get it a sibling (world is hard enough doing it alone).. so 3brdm... ummmmm... even with a $2MM 3bdrm in prime.. .it's like $15K/ month to carry... and the MD/VP jobs paying that much are gone forever.... yep forever... It'll b much closer to commercial banking which is 1/10 the bonus of I-banking... Good Luckz all ! There I go with the "z"......
But you are ready to shoot the old gray mare and I, and many others, believe that the old gray mare can and will evolve and thrive in a new manner.
Oh, and we are talking about the financial services industry and not an old horse, right? Steve, actually, I would also be opposed to shooting the old gray mare if we are just talking about an old horse....for the record.
New York's financial industry is clearly downsizing. And probably downsizing more than in past cycles, but to say that NYC will no longer be the financial capital of the world is a bit of a joke.
First, the U.S. remains the largest source of risk-taking capital and wealth in the world. China, India and Europe still have a lot of catching up to do.
Second, NYC is where most the financial firms and finance people live and work in the U.S. that deploy that capital. Sure there is a current contraction, but no other city in the U.S. comes close to having the financial firm concentration that NYC has. There are 1000s of finance industry firms in NYC.
I agree the NYC real estate market is about to take as big a hit as it has ever taken from Wall Street job loses and shrinking bonuses, but the NYC economy will still largely be supported by the financial industry. Citi selling its retail Smith Barney business, although significantly, is hardly large enough to be so transformational to eliminate NYC as the capital of finance. Smith Barney and Morgan Stanley brokers are located across the country already and even if Citi breaks up, most of those jobs, although fewer, will remain in NYC.
"Then there's the question of the future shape of the financial industry. All we know right now is that we don't know what it will look like except it will be unlike anything we've ever seen before."
Agreed, however I don't feel like Charlotte is what it will look like. To put a positive spin on it, how about a Manhattan filled with smaller, entreprenurial firms with more flexibility and less corporate infrastructure? There is something exciting (and possible) about this scenario.
I could probably agree with that, JuiceMan. But the decisions won't be made here, and the decision-makers won't be here.
Unless Bloomberg can do the unthinkable and talk Ken Lewis into moving the headquarters. I had entertained that possibility in the past, till I found out that Ken is from Mississippi.
IF Bofa moves its corporate headquarters here and leaves retail based in Charlotte, then I would revise my prediction. But given the costs and the culture, it seems unlikely. We'll have a financial component to our economy, but it won't be what it used to be.
"Charlotte will be the US capital of finance"
not sure why you say this. BOA might close all of fixed income in charlotte and have everything in there new offices..in NY. a lot of cuts have happended at both Merrill and BOA, but BOA had a majority of its fixed income sales and trading fired. Yes, there are many other parts of BOA that remain heavily in charlotte, but to call it the US capital of finance is a BIG stretch.
Obama is going to personally supervise the bailout. He says he will veto any attempt to limit his power and control over the money. As you are well aware all the major banks and insurance companies are now or soon will be government partnerships. People on this board were skeptical of my claims that financial power was shifting to D.C. but such things may still come.
NYC will always have a place for sentimental and historical reasons.
Chicago will have the doors blown off it's hedge fund industry and soon be crashing and burning.
Lawmakers who emerged from the session said the president-elect pledged to correct what they believe were shortcomings in the way the Bush administration handled the first $350 billion. They added he would veto any attempt to block his own administration's use of the funds.
I'm all for Citi to go out the door! One of the most greedy, and evil corporations in the US and they did it all with a smile on their face. Sandy, I hope you burn in H3LL!
"have everything in there new offices..in NY"
I doubt it. It costs twice as much and gains no additional benefit.
Steve- would you like to talk to my BOA fixed income sale coverage, who works on the charlotte floor? 75% of her desk was fired last week. I think she knows better than you. Most of the new division heads are from the Merrill side.
Ken Lewis has a lot on the line here. The merger is not going smoothly so far and if it ultimately turns out to be a bad decision it is all going to fall on him....and Thain will be there to pick-up the pieces.
None of these huge financial supermarkets have worked out the way they were supposed to, so the smart money says that even if it doesn't blow-up in Ken Lewis's face at the end of the day it is quite likely going to be much more difficult, much less profitable and end-up looking much different than he envisioned it.
No, stevejhx is the one that really knows what corporate America is going to do. All the big decision makers in the corporate world spend the overwhelming majority of their day speculating and rumor mongering on streeteasy.
To think that a TRANSLATOR has any clue what's going with BofA, etc., is insane. Maybe in stevejhx's world, he does, but not in our world.
Thanks, Steve. I have been following BAC closely over the past several months as I have been building my position, and I really doubt that Ken Lewis will waste millions of dollars in overhead simply to maintain a large presence in Manhattan. Lewis made his name as a cost-cutter, so I doubt he will overpay for office space, particularly since prices are going to get even lower in Charlotte with the death of Wachovia.
"75% of her desk was fired last week"
Doesn't mean that they're going to stay here, first, and second, fixed-income traders are being fired all over the place. There is no market for securitizations anymore, which is a good deal of what they traded.
"Lewis made his name as a cost-cutter"
My point exactly.
"To think that a TRANSLATOR has any clue what's going with BofA, etc., is insane."
It might be, but you don't know precisely what it is I translate. Lots of legal stuff, lots of confidential stuff.
That's right, except for Goldman Sachs, Morgan Stanley, thousands of people with Deutsche Bank and Barclay's, JP Morgan, American Express, many private equity funds, hedge funds, lots of small firms, the NYSE, NASDAQ, we have nothing left in New York.
I don't think you can simply characterize the current bloodbath on Wall St. as a cycle; it's a seismic shift in the world of finance. This is not simply a "this too shall pass" thing. It's gone. Forever, or at least for another 70 years, like the way the mistakes of the Great Depression were eventually forgotten. Finance is no longer geographically dependent on New York- trading floors can be set up anywhere with a data cable. Back offices and data centers can be located anywhere in the country. Now that Wall St. is getting the high colonic it so righly deserves, companies are going to take stock and think about what it will take to become profitable again. A large part of that will be realized by leaving an area with a heavy tax burden, exhorbitant real estate prices and an overpaid workforce.
More fuel to the fire:
Citi reportedly to unveil major re-organization
Financial-supermarket strategy may be replaced by focus on banking
SAN FRANCISCO (MarketWatch) -- Citigroup Inc. will reportedly unveil a major re-organization that will end its efforts to build a global financial-services supermarket, according to media reports.
Citi said earlier Tuesday that it's talking with Morgan Stanley about a combination of the two companies' brokerage businesses. The deal could be set up as a joint venture. Morgan Stanley may pay $2.5 billion to Citi for a majority stake and have the option to buy the rest of the unit later, reports say.
Beyond that deal, Citi plans to narrow its focus to just wholesale banking for large corporate clients and retail banking for customers in selected markets around the world, the Wall Street Journal reported, citing unidentified people familiar with the matter.
Other businesses likely to be shed include Citi's consumer-finance operations, such as Primerica Financial Services and CitiFinancial, private-label credit cards and many of Citi's consumer-related businesses in Japan, the newspaper added.
except for Goldman Sachs
cut 20%, more with Smith Barney
thousands of people with Deutsche Bank and Barclay's
Just announced 1000's of layoffs
had to become a bank to get funding
many private equity funds
To be reregulated
lots of small firms
the NYSE, NASDAQ
they have no reason to stay - trading pits will soon be completely gone.
"High colonic": LMAO!
From the standpoint of attracting the talent to work in these firms, a good number of people want to be in NYC and not Charlotte, DC or Kenosha. That also plays a large role in where these firms sit. If you can't get the talent you want, then your firm will suffer.
UBS has had difficulty for years trying to get good people to work in Stamford, CT and you think it is going to be easy to get people to work in Charlotte or DC...not likely. It could very realistically be cheaper to hire good people and base them in NYC, than to hire mediocre talent to work in Charlotte because the office space is cheaper.
waverly, waverly, waverly. I know lots of people who relocated to Charlotte after the dot.com bust, and they wound up loving it. Charlotte is not Stamford.
I have a friend I worked with at Bank of America in Miami in the 80's. So determined is he to stay in Miami that he has worked for increasingly bad companies including Sony Music, Avaya, and now UNISYS. The jobs are gone from there.
You go where the work is, and if Ken Lewis decides that's where the work is going to be, then there it shall be.
Disagree with your Stamford and UBS comments, waverly.
Most people living in Fairfield County, a fairly prosperous NY suburb, prefer the commute to Stamford versus New York. And UBS is located right next to the train station.
It's a pretty nice life style for most families along with far more affordable homes and good schools.
New York costs simply need to decline. Residential real estate prices are a big factor that needs correcting.
This just shows how little you understand of how these firms recruit people. I know lots of people who have moved out of this area and loved where they went, but I know more people who have left NYC and hated where they went. You have to put the goggles down and look at this with an open mind and realize that you don't understand all of the nuances that are involved as much as you think you do.
If you understood a lot of what has been written already about the BOA/ML merger you would see that the writing is already on the wall ehn it comes to resistance to people going to Charlotte and a need to change the culture to keep the Merrill people and not the other way around.
Also, don't kid yourself, Ken Lewis is going to do what he has to do to make money. If that means Ken Lewis adapting and changing BOA's way of doing things, then that's what he'll do....or he'll be the one out and he knows this.
waverly, how long did you work with or at banks, and how many bank mergers have you lived through?
I was recruited by banks and was a bank auditor (internal and external with Price Waterhouse) so I know quite a bit about it. I also worked on bank mergers. The Thundering Herd does indeed have power within Bank of America - witness their decision today to keep the name - but they're all over the country.
But nobody else has clout, especially not traders who can live anywhere. When I worked for BofA in Miami nobody wanted to go to San Francisco when they closed their operations there, but 75% did.
Especially now, with unemployment headed up.
Citigroup, Morgan Stanley Agree to Merge Brokerages
Citigroup has agreed to merge its Smith Barney brokerage unit into Morgan Stanely's brokerage operations, the first step in ultimately shedding Smith Barney and a move away from the financial supermarket model that Citigroup has followed for the past decade.
The boards of both Citigroup and Morgan Stanley have approved the joint venture, CNBC has learned.
Thousands more layoffs in New York.
Rufus : Chicago = ______ : Charlotte
Fill in the blanks
hvd - funny, but no way. I wouldn't move to Charlotte if my life depended on it.
And it doesn't.
But lots of people's do.
"I have been following BAC closely over the past several months as I have been building my position, and I really doubt that Ken Lewis will waste millions of dollars in overhead simply to maintain a large presence in Manhattan. Lewis made his name as a cost-cutter, so I doubt he will overpay for office space, particularly since prices are going to get even lower in Charlotte with the death of Wachovia."
mh23, I'm not a trader but I would not be building a position in BAC. This merger is shaping up to be a disaster. waverly is spot on with: "the writing is already on the wall when it comes to resistance to people going to Charlotte and a need to change the culture to keep the Merrill people and not the other way around"
"waverly, waverly, waverly. I know lots of people who relocated to Charlotte after the dot.com bust, and they wound up loving it. Charlotte is not Stamford."
I have worked in, have many business school friends, and my in-laws live in and around Charlotte. There is nothing wrong with the place but it will never be NY, London, or HK. Traders will not move because BOA has a HQ there. That’s just silly.
There are more conversations that firms have about moving jobs to NYC to be able to get the talent that is here than you would imagine. There is a certaine cache to being in NYC, whether of not it is real, and firms want that. Everything looks bad for NYC right now because, well, just about everything is bad right now. That will change, even if it doesn't seem like it, and cooler/smarter heads will prevail and more than you think will remain in NYC.
You work on confidential translating and certainly hear (or read) things, but I am in a unique situation too. I will hear more rumblings about where the jobs are going (or coming) and understand how it will happen.
Please do know that I am not suggesting that NYC will have no pain. I think it is going to be tough and many jobs will be lost, but there are a number of variables that can positively impact NYC going forward and I believe that enough of them will come to fruition.
Topper - I agree with you that Stamford is not a bad location and the towns around it are very nice places to live and raise a family. I was trying to explain that, even with Stamford's close proximity to NYC and the easy commute, it has an impact on bringing talent to UBS. The jobs that are based in CT versus comparable jobs in NYC take conservatively 2-3 times as long to fill and that is costly. Trying to get that talent to go to Charlotte en masse would be almost impossible and so cost-prohibitive going forward that the smarter move would be to keep the jobs in NYC.
stevejhx, what is your goal? For YEARS you keep posting this "Fire! Run!!" shit, and still you seem to remain here, in New York (at least that's the impression you strive for, although I highly doubt it). The whole of you that comes across this board is depressing to think about, incessant typing and all.
"That’s just silly."
Not if they want to work. I've seen it happen before. This is not just your normal cyclical shakeup of a distressed industry. This is a change the likes of which we haven't seen since the Securities Act of 1932.
"This merger is shaping up to be a disaster."
The merger is brilliant and it will work in a way that Smith Barney didn't precisely because BofA has 6,000 branches throughout the country, and is adept at cross-selling, wich is not the case for Citibank. This was AP Giannini's dream for the original Bank of America, until it was severed from TransAmerica (its original parent) and forced to divest its interstate branches into First Interstate, in the 30's. It was also Clausen's dream for the company until he went to the World Bank and the disaster of Sam Armacost caused it to have to divest its consumer finance division (slated to be an interstate bank, which was then illegal), Charles Schwab, and Banca di Italia.
"I will hear more rumblings about where the jobs are going (or coming) and understand how it will happen. "
proof from stevejhx himself that he is mentally unstable:
He is really off his meds!!
I know, I know...Spanish is detrimental to the location of BofA HQ and employees.
Keep that kind of rhetoric up, and you will have the SEC knocking on your door. You KNOW you have no clue what goes on. You run your business out of your apartment, you small time loser!
but you don't know precisely what it is I translate. Lots of legal stuff, lots of confidential stuff
Nope. I've only been posting for one year. Slightly less, actually.
oldbuyers, you don't even know what I'm looking at right now.
BOA is adept at cross-selling? Show me any proof that cross-selling actually increases profits, because all of the experts have admitted that they cannot.
The BOA/ML merger is not going to be how Ken Lewis imagined it.
The Citi jobs lost to Morgan Stanley were going to be gone in one way, shape or other anyhow. Citi is full of so much fat.
Steve, you crossed a line with that one. I have to agree with oldbuyers, you are borderline illegal with your comments.
oldbuyers, you are right about the SEC. I think we should encourage this stevejnx person to keep typing. Very soon he'll finish disclosing the confidential papers he happened to peek into. He just can't keep it in. Fun to watch!
As means of protection, maybe Streeteasy should keep an eye on his IP. Just to be ob SEC's good side.
either he just committed an SEC violation or he revealed that he is all full of BS.
Either way, he lost a lot of credibility.
"you are borderline illegal with your comments."
No I'm not. Not even close. Let them investigate. Nothing to find.
"Show me any proof that cross-selling actually increases profits"
MBNA credit cards, Countrywide mortgages (just beginning).
"The Citi jobs lost to Morgan Stanley were going to be gone in one way, shape or other anyhow."
Not if they remained separate.
"Citi is full of so much fat."
No clue how you qualify this merger as "brilliant", especially if you're using any historical precedent to count on cross-selling as the upside..I think cross-selling has been used as justification for more wasted capital than anything since optical fiber and wavelength division multiplexing- WDM. Ken Lewis was pounding his fist that the dividend was safe last summer (at $.64/qtr), and then he cut it. Not brilliant..Then he said his dividend was safe in the fall (at $.32/qtr), but I'll bet you right now the 12% indicated yield today is going to get cut. He bought CFC because he had to be LARGER in residential RE and wanted their servicing platforms and failed to recognize the severity of the housing problem. Clearly, that was not brilliant. Maybe he was saving his brilliance for MER, and driving better productiviy of that brokerage force, and realizing WFC-like success in cross-selling but that's been a VERY un-brilliant bet through history
The idea that cross-selling is profitable is a myth, like the Loch Ness Monster and The Easter Bunny. It sounds interesting, seems to make sense, but no one has ever seen it.
Okay, The Easter Bunny is real, but not The Loch Ness Monster and cross-selling is not profitable.
Actually, stevejhx, what you said and implied is very illegal.
And I alerted the SEC.
Wave: You are correct if you assume that ALL won't move or enjoy living somewhere else. However, for the correct company MOST will relocate and be happy about it. Google, Pimco, Renaissance, Northern Trust, and until recently, a huge % of P/E and Hedge Funds had no trouble at all recruiting for locations outside of the friendly confines of NYC.
"The merger is brilliant and it will work in a way that Smith Barney didn't precisely because BofA has 6,000 branches throughout the country, and is adept at cross-selling, wich is not the case for Citibank. "
I agree that the idea of the merger is brilliant, but would not bet on the execution. This one will be fun to watch. Is anyone out there interested in investment services from your retail bank? Don't you love it when someone from your bank calls because they think you have too much money in your savings account and they want to invest it for you? Fuck that.
patient - that is true. I think a smaller company has an easier time becasue they can control the culture in ways that larger firms cannot. Plus, the simple fact that larger firms need to hire more people and that naturally opens up more challenges when they try to recruit top talent. It is easier to get 30 people to go somewhere than 300 people.
Also, in tough markets like this I would imagine most people would say they will relocate and once things turn around they leave and come back to NYC. Moving people around the country is actually pretty challenging and a lot of the time it doesn't work out. People miss their friends or families. They have kids or spouses who are not happy with the move. They could hate their noew role or the people they work with. It is just an added layer to the mix, so when these firms try to hire the best people it helps to be in a location that a) has a lot of people to draw from; and b) is a location that a lot of people want to live.
NYC isn't perfect and neither is Charlotte, but there just is not enough evidence to prove that Charlotte will be getting a huge influx of jobs. Some yes, but I believe that NYC will too. It just may not be tomorrow or next week.
patient09, Where did Google relocate to? Last I checked they still had tons of people in the city.
For all of those thinking about corporate exodus out of NYC because of costs, have you seen the commercial real estate market lately? Lots of opportunity to lock into low, long term deals.
What's everyone doing on this thread.. .there a fight going on on the other thread ... come on!
["you are borderline illegal with your comments."
No I'm not. Not even close. Let them investigate. Nothing to find.]
You made a stock market prediction and cited confidential material as the reason for your prediction. If that isn't insider trading, I don't know what is. Personally, I think you're lying through your teeth, just like when you talk about that wonderful PhD program at Columbia. Then again, I wouldn't be surprised if the SEC has regulations against *lies* that imply insider information either, if its meant with the goal of affecting the stock price.
You really do need to be careful. This isn't about streeteasy recording your IP address - you've very often given your real first and last name here, publicly.
Juice Google's presence in NYC is a rounding error compared to Googleplex
I'm just not seeing the purported SEC violations here. I do agree with those who say the BOA situation is probably not going to end fortuitously. Citi is not analogous, but is nonetheless a reminder of how hard it can be to integrate disparate business entities and cultures.
I have no idea whether or not Charlotte will prosper or rot (nor do I really care, other than general demographics are kind of interesting in an abstract way), but NYC is not looking like it's on an upward trajectory at the moment. It is a horribly expensive city, and it really isn't necessary to keep the majority of your workforce here in order to have your figurehead headquarters listed as NYC. It takes companies awhile to get out of current lease obligations. If things don't turn around within a couple of years, it could get kind of interesting in a bad way.
"Juice Google's presence in NYC is a rounding error compared to Googleplex"
Agreed, but has the Google NYC population moved outside the city? That's what I thought you meant.
"And I alerted the SEC."
And alert me when they stop laughing at you.
"seems to make sense, but no one has ever seen it"
Then you haven't seen what happened with BofA's credit cards. And every Countrywide office will be turned into a BofA branch, and there will be a BofA branch in every Merrill Lynch office where Merrilly Lynch bank is.
It's brilliant. It's what Citigroup DIDN'T have - a platform to integrate. They tried to integrate insurance and banking which, with the exception of certain types of annuities, have nothing to do with each other and can't be cross-sold. But cross-sell mutual funds and money-market funds and stocks and bonds? Fidelity and Schwab do just that.
You're right, JM - it won't be easy. But having been in both places, the cultures are similar.
"Is anyone out there interested in investment services from your retail bank?"
You're asking the question the wrong way around. "Is anybody interested in banking services from your stock broker?"
Yes. "Total Merrill." It was a huge success, but still limited b/c there was no branch network to support it. Dean Witter, one of the biggest & best brokerages, got started in Sears stores. There will be a Merrill broker in every BofA bank.
"I'm just not seeing the purported SEC violations here."
aboutready - they like to try to get me upset. I don't own any stock in an of those companies, and have revealed nothing about them, and, in fact, I don't even work for them (though I do for their competitors), which shows how assinine they are.
"You made a stock market prediction and cited confidential material as the reason for your prediction"
That's why I love tech_guy. Like the others, he takes the bait!
Did I make a stock market prediction in this thread?
Why does everyone act like BoA is hurting for space in NY?
Don't they have a 1,000ft skyscraper under construction next to Bryant Park that's not even fully completed yet?
Exactly, RR1. They have way too MUCH space.
Let's remember, New York is not the center of the universe. I know that's hard to wrap your minds around, but there IS a recession going on in the other corners of the world and by pretty much all counts, NYC is doing better than the other cities in the US.
I have many finance friends in Charlotte and half of them and most of their colleagues have been laid off. The notion that Charlotte is some healthy financial hub paradise is hysterical.
"NYC is doing better than the other cities in the US."
Not really. Wait and see.
"you know he has some anti-NY sentiment for whatever mental reasons."
Oh, gleeclub! I was born in Astoria!
"If you notice and comment on a person, you aren't IGNORING that person"
Unless someone else posts it verbatim, which is what happened.
"Here's one point for context"
What's the point you're trying to make?
"hen I'm not sure the information you are gathering"
You have NO idea.
"And the history of AP Giannini, while interesting, hardly seems relevant - he died in 1949. "
Glad you got the wiki out! But again you miss the point: the distribution network.
"That isn't proof that cross-selling increases profits."
So we're going back to nyc's question as to whether a bodega should account for the counter space taken up by chewing gum.
"Dean Witter existed before Sears owned it."
Yes it did. And it got big by opening up in Sears. The point is the DISTRIBUTION NETWORK.
Oh - the point about A.P. Giannini, though he did die in 1949, is that he invented retail banking.
3. Pretty much. (Actually, the begged me to stay.)
4. More than you.
5. It's in the family.
6. Didn't want a PhD
8. No clue.
9. Have an idea.
10. A few.
13. What "proof"?
15. On streeteasy?
Please. LAME, LAME, LAME. And that is not a "children's online acronym."
New York is full of reinvention.
Also, why does this end up as a fight between people instead of a discussion of Citigrop or New York City.
I'm glad everyone here knows how steve spews nonsense backed by nothing on a consistent basis. It is amazing how many times he can mis-apply concepts and screw up an analysis but go on and on to make it sound good. Like any business, the high margin areas will pay more than the low margin areas. Just because an investment bank merged into a commercial bank does not mean that every division in the entire company will be paid at the low margins. When the markets recover and the demand for investment services increases, New York will still be a major base for the companies that provide those services. steve has no credible argument to dispute that.
Steve, you are quick to point out all of the costs associated with buying versus renting, but you seem to forget all of the costs associated with two firms merging. Is there some uptick in certain business because of cross-selling? Of course. Is it profitable? No. Is there any evidence that any of the financial supermarkets were a success? None.
Also, a number of brokers are lamenting that there is no more brand recognition due to the mergers. All the platforms and products are the same. This is another reason that people are getting together and formulating plans to start new firms. Their argument will be easy. We are different than the big, financial supermarkets and we can make you more money.
"you seem to forget all of the costs associated with two firms merging"
Not at all. There are huge costs. Not the least of which is severance, which is my point.
"Is there any evidence that any of the financial supermarkets were a success?"
Supermarkets need distribution systems. That is what Citigroup did not have - it has very few branches in the US, is spread thin throughout the world. What JPM, BAC, and WFC are doing is quite different: they are setting up a retail distribution network.
Time will tell. I believe that they will not succeed anywhere near the level that Ken Lewis is anticipating. This is not because I think I am smarter than Ken (which I don't), but based on the history of these transactions and the challenges involved even with all of the networks and systems that are in place.
I also think people like to have a choice and not have all their eggs in one basket. Their is a lot of evidence that shows you want X done you go to the firm that is best with that. You want Y done you go to the firm that is best with that.
It will be interesting to watch over the next couple of years, though, that is for sure.
There are vast differences between the C model and the other models, and vast differences in the execution. Credit card and mortgage platforms are easy to integrate into retail banking. Retail banking is not integrated into a brokerage business - you just provide access to banking services as an aside. The brokerage will bring in banking clients, but not so much the other way around.
Citigroup has been destroyed: poor vision, poor execution. It will probably shrink to almost half of what it was in its heyday, and I don't think it has much of a chance at this point ever to catch up with the Big 3.
That's not good for New York. When its vast foreign holdings are sold off, management of them moves overseas. JPM, BAC, WFC were always focused primarily on the US market. C was never focused on any market. It has been destroyed.
I'm with Steve. It wasn't the concept that killed Citi.
That place was just a mess. Horribly run. Even the valuable SB portion.... just stupid, stupid management there.
Citi has been a mess for so long. They have a lot of overpaid people who don't really do anything...think Office Space. Seriously, when every other big firm was getting rid of their fatty layers of middle-management in the late 80's and early 90's, Citi was not only keeping theirs, they were increasing the number of people in these roles.
They have tons of back-office people who do nothing but manage other people who do the work. The industry changed into much more of a hands-on position at all levels except the uber-heavy people in departments. The banks today run a lot leaner than in the past. I don't know if you saw this when you audited them at PWC, or if it happened after you left public, but these expensive back-office jobs just don't exist in any other firm. It is these very people who are going to lose their jobs first and they are going to have a terrible time finding a job. They will either say they just want to manage other people and not get the job or they will be asked when the last time was that they actually did hands-on work and when they tell the truth they won't get the job.
I never audited Citigroup, but I had friends who worked there who told me what it was like. When I worked at BofA in the 80's and 90's I did have some informal contact with Citigroup auditors, and no one could explain exactly what they did even back then.
BofA is ruthless at cost-cutting. So is JPM. C was/(is) bloated, not integrated, and spread all across the globe. I posted on urbandigs.com about 9 months ago what I thought was wrong with them and I predicted they would be disassembled.
This is going to be disastrous for New York. Once the parts are sold off a la AIG, I suspect the US operations will be taken over by US Bankcorp or someone similar. Every other bank had a strategy: we want to be #1, #2, or #3 in our markets. Anything less we divest. C's strategy was: we want to be in every market, regardless of the position we hold.
Why are there branches of Citibank in Athens, Greece, but not in Athens, Georgia?
i'm just wondering where all these Citi deposits are going - duh, nowhere
Seems I was right after all:
Financial Giants Are Moving Jobs Off Wall Street
Miss you guys. (Not really.)
Welcome back. We miss you (really). Please stay back and neutralize somewhereelse.
stevejxh, by the time the permabulls realize what hit them, i.e., WS is downsizing rather rapidly, they would be the last inline at the unemployment office.
Simply put, look at the banks' revenue model from pre-08 vs now :)
The record shows that Steve has been wrong for three years and running . . .
Citi was indeed too big to fail.