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Restructuring at Citibank Group 8

Citibank underwent restructuring in the early 1990s after facing difficulties from real estate lending. By 1997, it had become highly profitable again. The restructuring involved shifting from a geography-based structure to one focused on customers, products, and geography. It aimed to better serve global corporate clients and exploit growth opportunities. The changes included emphasizing customer relationships and global products over local services, as well as tying incentives more closely to customer and product performance rather than geography.

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Adarsh Samalopanan
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81 views

Restructuring at Citibank Group 8

Citibank underwent restructuring in the early 1990s after facing difficulties from real estate lending. By 1997, it had become highly profitable again. The restructuring involved shifting from a geography-based structure to one focused on customers, products, and geography. It aimed to better serve global corporate clients and exploit growth opportunities. The changes included emphasizing customer relationships and global products over local services, as well as tying incentives more closely to customer and product performance rather than geography.

Uploaded by

Adarsh Samalopanan
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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RESTRUCTURING AT CITIBANK

GROUP 8
AN OVERVIEW- UPTO 1991

Began its foreign debt operations in 1897


By 1917 had branches in 35 countries
Provided financial services for corporate customers, with exception of
investment banking service in USA
Three categories of corporate banking services
Transaction Services
Corporate Finance Services
Capital Market Services
At beginning of 1990s was reeling from its near-disastrous real-estate
lending
In 1991 its stocks was trading at $9 a share
CITIBANK BY 1997

One of the most profitable US banks


Had profits of $3.59 billion after a $556 million after-tax restructuring
charges
Both business units gained high profits
Consumer Banking $1.904 billion
Corporate Banking $2.558 billion
Profits from OECD countries were $.967 billion
Profits from developing countries were $1.6 billion
HOW DID THINGS CHANGE??????
RESTRUCTURING AT CITIBANK

Customer
Geographi 1994 Product
c Geograph
y
Contd

STRATEGY
CUSTOMERS
Pre-1994 Served the geography based subsidiaries of large corporations operating
within the country
Post-1994 Focus shifted to serving these large corporations directly , as well as
serving the needs of institutional investors
PRODUCTS AND VALUE PROPOSITION
Pre-1994 Country organization will serve a full range of the clients financial needs
within that country
Post-1994 Focus now shifted to serve a full range of global customers financial need
around the world
Contd

ORGANISATION
Pre-1994
Organization was strictly along geographic divisions
In OECD countries, customers received the benefit of WCG (World Corporate Group)
lobbying on their behalf with the divisional management to provide more
customized services
Post-1994
Organization was more multi-dimensional with three dimensions of customer,
product and geography
Priorities were assigned in the ascending order in which they are listed
Contd..

INCENTIVES
Pre-1994
High power incentives
Revenue recognition primarily on a geography basis

Post-1994
High power incentives on multiple dimensions
Multiple revenue recognition, including by product and customer (GAPS)
OBJECTIVES OF RESTRUCTURING

Exploit market opportunities


In Europe, USA and Japan slow economic growth led to lack of revenues
To satisfy increased demands by investors, corporations did horizontal
mergers, outsourcing back office activities, investing on emerging markets
and stock repurchases
These increased the demand for financial products of various types
This provided market opportunities for Citibank, and necessitating an
increased customer focus
Ward off competition in corporate banking sector in OECD countries
Competition were increasing in this sector
To get a competitive advantage over local players, Citibank was anxious to
leverage their global reach
This would be difficult with geographic division approach
INCENTIVE DESIGN & IMPLICATION

Aimed at giving priority to the customer dimension of performance


Product dimension was given second priority
Certain aspects of servicing clients needs such as customer relationship
management were now included as criteria for distribution of rewards,
when whereas earlier such activities were all but ignored in the
distribution of rewards and were left to the initiative of the geographic
divisions
This had three implications
Coordination
Accountability
Reward Allocation

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