Citigroup's One-Stop Shopping is No Longer - January 14, 2009

The express checkout lane is now closed. In what was known as the “financial supermarket,” Citigroup Inc. (C) confirmed earlier today that the bank was dissolving its 10-year experiment in which customers could get one-stop financial services from the bank, including anything from consumer loans to investment banking.

On the heels of the bank’s announcement yesterday to sell a major stake, 51%, of their Smith Barney brokerage operations to Morgan Stanley (MS), Citi has accelerated its plan to sell off their businesses that they had planned on relinquishing in the coming years.

The introduction of the “supermarket’ was supposed to be an innovative venture for the bank, as the average customer could have a full gamut of financial services provided to them. Dating back to 1998, the merging of, then insurance giant, Travelers Group and Citicorp, which at that time was the nation’s largest bank, fell on the shoulders of Citicorp’s CEO Sanford Weill.

The biggest question, which appears to be answered today, was whether Citigroup could provide better services as a whole, than other specialized businesses. It appears that one company cannot provide such a diverse scope of services efficiently and successfully.

Since the creation of the financial “supermarket,” shares of Citigroup have fallen more than 75%. Today’s trading session brought much of the same trend for the company’s stock. By the end of the day, shares of C were down more than 23%, losing $1.37 to trade at $4.53 per share.

"I think within 12 months, Citigroup no longer exists," stated William Smith at Smith Asset Management, who currently is in possession of Citigroup shares. "The problem with Citi is the model, the execution, the management," Smith went on to add. "How do you go a decade without integrating?"

Looking into the company’s upcoming 4th quarter, Citigroup is expected to post a loss of $10B from operations, despite the recent efforts from the government in which the bank received a total of $45B in relief funds from the TARP, the Troubled Asset Relief Program.

The only positive that Citigroup has to hang its hat on comes from the possible venture with Morgan Stanley. If the deal for Smith Barney goes through, Citi will receive much needed capital in a time when raising funds has appeared most difficult for struggling companies.

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