Banks and Financials

Brokerage	Recommendation	Sentiment
Merrill Lynch
Morgan Stanley
Lehman Brothers

AIG - American International Group (AIG) NY, NY CEO Martin J. Sullivan http://www.aig.com/

· Sells property, causality, and life insurance in 130 countries

· AIG started in Asia in 1919

· Once run by Maurice Greenburg – Insurance industry titan – Became chairman in 1989, resigned in 2005

· World’s largest publicly traded seller of property-casualty insurance

· US’s largest life insurer by premium’s

AIG Acquisitions and Stakes:

· 20th Century Industries - California auto insurer in California, , AIG has a 51.1% stake

· Bought a 7% stake in Blackstone Group (buyout firm)

· Acquired a 50% stake in Prever SA. - 2nd largest private pension Co. in Brazil

· Has a majority in Transatlantic Holdings (Reinsurance) 50.1%

· Reinsurance worldwide with a focus on causality classes and health lines

· Acquired Sun America (major player in annuities for $18.12B in stock)

· CEO Eli Braud

· Stepped down late 2000 – Jay Wintrob will take position

· Brings together two of the top major insurance minds

· Has a strong network of products with variable life insurance

· Puts AIG in arena of Financial Services for the individual investor

· Foreign operating profits represented 50% of revenue in 1997 (Industry rate is 18%)

· August 2000 – Controlled $139B in assets

· Invested $200M in Hyundai Securities

· In 1998 invested $106M in a South Korean cell phone company – in 2000 sold for it for $600M

· American General:

· Bought American General for $24.6B

· Largest provider of commercial property-causality insurance

· AIG will obtain about 50% of its pre-tax earnings from life insurance, 35% from property – causality insurance, and 15% from financial services

· With W.L. Ross & Co. – Investing $860M in three financial affiliates of Hyundai Group of South Korea

· Bought a 20% stake in Brazil’s Goi Airlines (Similar to Southwest) for $26M

· Bought GE Edison Life Insurance (Tokyo based) and GE US Auto & Homeowners Insurance unit for around $2.15B – June 2003

· Now sixth largest insurance player in Japan

· Venture with Peoples Insurance Company of China – Will market Accident and Health Insurance in China – October 2003

AIG General Info:

· Known for its global commercial property, causality, and life line

· Diverse product line and geographic focus have made it one of the most reliable steady growing companies

· Biggest writer of D&O insurance – Insurance for Directors and Officers liability

· Has 250+ subsidiaries

· International Lease Finance – Owns and finances most of Boeing’s and Airbus larger planes for the Airlines

· Has 760 planes leased to airlines as of March 2005

· At the end of 2004 – 824 planes leased and No.2 leaser behind GE

· HSB Group – Hartford Steam Boiler Inspection and Insurance Co – property casualty

· Avantrust – with Dun and Brad Street – B2B secure transactions with credit info, goods inspected and insurance options

· Triple A credit ranking

· CEO Maurice “Hank” Greenburg:

· Became CEO in 1967

· On AIG’s prospects in 2004 – “Good operating environment before us… and strong property-causality”

· CEO Hank Greenburg stepped down March 14 2005 on the heels of facing a deposition from NY Attorney General Elliot Spitzer over deals involved with General Re

· Vice Chairman and Co-COO Martin Sullivan is the new acting CEO

· Hank will become non-executive chairman of AIG – He resigned from that position (non-executive chairman )weeks later

· Hank Greenburg resigned as Chairman June 8 2005

· Mr. Greenburg held a roughly 12% stake of AIG and held by Star International.

· New CEO is Martin Sullivan

· Maurice’s son, Evan Greenburg resigned September 20^th, 2000 – was being groomed for CEO slot

· Evan Now CEO of Ace Ltd. and his other brother Jeffrey Greenburg is/was CEO of Marsh McLennnan (Jeffrey was ousted October 2004 due to Spitzer’s investigation)

· Breakdown of Revenue:

· Life Insurance – 40.5%

· Property Casualty Insurance – 39.8%

· Airplane Leasing – 7.47%

· Financial Services – 7.3%

· Asset Management – 4.9%

· Asia:

· December 2001 - Won four new insurance licenses in China – Four Cities – quite a breakthrough and way ahead of the competition

· AIG received 28.4% of their revenue from Asia in 2002

· AIG Huatai Securities – First joint venture fund in China – July 2004

· Venture with Peoples Insurance Company of China – Will market Accident and Health Insurance in China – October 2003

· “It’s classic AIG behavior…It bad-mouths the system and says how awful everything is. At the same time, it sells massive numbers of policies. They win either way, If there’s no tort reform, AIG still pulls in big premiums. If there is tort reform, AIG gains market share in a line that’s going to be more profitable.” – Robert Hunter – Director of Insurance for the Consumer Federation of America

· Combined ratio on general insurance (total cost of paying claims and expenses as a percentage of premium collected) – If under 100 – They made a profit on their underwriting

· 1998 – 96.4%

· 2002 – 105% - They lost more money than they took in!

· 2003 – 92%

· NOTE – After AIG’s Debacle of 2005 – These numbers may be incorrect and may be 1.3 percentage points higher

· Asbestos/Pollutant Claims and AIG – Having a third party review all old property-casualty claims and results will be completed and announced by the end of 2005

· 2004/2005 Embarrassment:

· Federal Grand Jury Investigation from Justice Department – October 2004

· Investigating its 1999 sales of insurance policies to Brightpoint (Indiana Cell Phone Distributor)

· Accused of helping Brightpoint shift losses forward

· PNC Financial Services accusation:

· In 2001 AIG help boost PNC earnings by shifting $762M worth of nonperforming loan off its books to avoid writing them down

· At issue are its non-traditional insurance lines

· October 2004 – Eliot Spitzer threw a bombshell at the insurance industry claiming price manipulation and bidding favoritism

· November 2004 – Paying $126M and will unveil four year of transactions

· Paying $80M to the Justice Department for PNC and Brightpoint problems

· Paying $46M in disgorgement of fees to SEC

· SEC Inquiry over 2001 deal with Berkshire Hathaway’s General RE unit – March 2005

· CEO Hank Greenburg stepped down March 14 2005 on the heels of facing a deposition from NY Attorney General Elliot Spitzer

· CFO Howard Smith also took a “leave of absence” – then fired later in the month

· Vice President Christian M. Milton fired over the allegations as well

· Deal involved AIG writing “non-traditional” insurance products worth $500M for General Re. Some claim they were loans disguised as insurance products. AIG acquired a non-performing portfolio from General Re as a “loss portfolio” and traded contracts to hide a loss on the bottom-line.

· Question was if there was any “risk” involved for either company

· Wall Street Journal’s March 15 2005 issue as detailed articles on the matter

· AIG admits deal was improperly recorded – April 2005

· March 2005 New Allegations

· Investigations regarding AIG’s dealings with Starr International Inc. and C.V. Starr & CO. Both companies are registered in Barbados

· Starr International was created in the 1970’s is run by AIG executives including AIG’s now Ex-CEO Hank Greenburg

· Starr owns 11.9% of AIG stock and pays deferred compensation to AIG employees

· Other Company’s deals being investigated – Coral Reinsurance, Richmond Insurance, and Union Excess Reinsurance and Astral Reinsurance, Capco (Capco was apparently used to hide losses) – AIG is the only client for Union Excess and AIG apparently owns both Union Excess and Richmond Insurance (Possibly used to shift liability away from AIG?)

· Investigating misconduct worth $1.5B to $3B on 30 insurance transactions with another 60 being flagged for revision by regulators

· April 2005 – AIG admits improper accounting and may need to reduce net worth by $1.77B

· The regulators are treating “footfaults” like “murder” – Maurice Greenburg – 2002

· Problems could erase $1.77B or 2% of its book value

· Earning restatement:

· AIG is restating five years of earnings statements (2000-2004)and could possibly reduce its net worth by 3.3% - Announced April 2005

· Restatement resulted in a loss of 2.7% of AIG’s total net worth - Announced June 2005

o Showed the year 2000 was not as strong as they boasted and in 2004, AIG actually lagged behind their peers

o Previously claimed from 2000 to 2004, AIG had an underwriting profit, now with the restatement , they only had one year of profitable underwriting when including marketing costs and claims paid out compared to the premium they received

o Net income was reduced by 20% or $2.9B from 2000 to 2004 and book value was reduced by $2.26B to $80.61B

· February 2006 - $1.6B settlement over improper accounting practices

· AIG is bailing out is Nightingale Finance group to the tune of $2.5 billion to pay for its senior debt related to derivative arm which was entwined in a structured investment vehicle. – Announced January 2008.

· Nightingale is part of AIG-FP Capital based out of London and is part of AIG Financial Products Corp. AIG’s derivatives arm.

Brokerage	Recommendation	Sentiment
Piper Jaffray
AG Edwards
Merrill Lynch

American Express (AXP) NY, NY CEO Kenneth Chenault http://www.americanexpress.com/

Three major operating divisions

1) Travel Related Services

· Includes credit cards, travel, merchant and network businesses, Travelers Cheques and Prepaid Services group

· 57.3M cards in force at end of 2002

· Average basic card member spending in 2002 - $7,645 a year

2) Financial Advisors

· Total assets under management - $230.6B – End of 2002

3) American Express Bank (AEB)

· Includes: Personal Financial Services, Private Banking, and Financial Institutions Group

· Shifting from commercial lending to consumer and private banking

· Personal Financial Services (PFS) and Private Banking accounted for 49% of AEB’s 2002 net revenue

American Express General Info:

· Return on average equity:

· 2002:

· TRS – 29.9%

· Financial Advisors - 11.6%

· American Express Bank - 0.67%

· Bought credit card portfolio form Bank of Hawaii (Pacific Century Financial)

· Has 11% of its investment portfolio in high-yield (junk) bonds - 2002

· Took a $1B in pretax charges from dealing with Junk Bonds

· Had CDO problems – Collateralized Debt Obligations – mutual fund of junk bonds

· The Financial Advisor Unit had 12% of its portfolio in junk bonds and CDO’s – lots defaulted

· Travel Related Services – Unit accounts for 60% of earnings

· CEO Kenneth Chenault took the reins from Harvey Golub, January 2001

· Harvey Golub was CEO from 1993 to 2001 – Currently Chairman of Campbell’s

· American Express Card – In 1970 had a 42.7% market share, in 2002 down to 19.8%

· Alliance with MBNA

· MBNA issuing cards under the American Express name

· IN:NYC – Line of credit cards tailored to specific cities and gives discounts and rewards to specific restaurants and other retailers in the area

· AMEX card acceptance – 60% rate to that of VISA MasterCard

· 2003 – Travel Related Services – 73.3% of revenue, Financial Advisors 23.6%, American Express Bank 3.1%

· With Industrial and Commercial Bank of China (ICBC) – Offering credit cards to Chinese citizen – April 2004

· Ameriprise Financial:

· Spinning-off its Financial Advisory Unit and renamed it Ameriprise Financial – Announced February 2005 and spun-off November 2005

· Acquired the unit in 1983 with the purchase of Investors Diversified Services

· In 2005, roughly 70% of the units earning came from insurance products and fixed and variable annuities. More of an insurance house than a brokerage.

· 2Q2005 – 14^th straight consecutive quarter of double digit increase in earnings

· 4Q2007 – Took a $440 million pretax charged to deal with non-performing loans

Brokerage	Recommendation	Sentiment
Bear Stearns
Piper Jaffray
AG Edwards

Bank of America (BAC) Charlotte, NC CEO Kenneth Lewis http://www.bankamerica.com/

· US’s largest banks

· 4,200 banking centers, 13,250 ATM’s

· Business Segments: Revenue Breakdown

· Consumer Banking and Commercial Banking – 67% of revenues

· Global Corporate and Investment Banking – 24% of revenue

· Equity Investments – Less than 1% of revenue

· Assets Management – 7% of revenue

Bank of America Acquisitions, Mergers & Divestitures:

· Merged with Nations Bank for $61.1B in October 1998

· Sold Robertson Stevens Investment Banking Unit – sold so that it wouldn’t compete with Nation’s Montgomery Securities

· Robertson Stevens Chairman Samford Robertson left to form his own investment bank

· Acquired a 25% stake in Grupo Financiero Santander Serfin – Mexican banking concern

· Fleet First Boston:

· Acquired Fleet First Boston for $43B – October 2003

· Will make it the second largest US bank

· Will have $993B in assets and will be the leader in every market expect the upper MidWest

· Adding 1500 branches and 3400 ATM’s

· Combined will have 5737 branches

· Revenue Breakdown:

· 56% of revenue will come from consumer and small business operations

· 25% from Global Corporate and Investment Business

· 11% from Commercial Banking

· 8% Wealth Management

· Will be run from Charlotte, NC

· Expected to earn $7.97 a share in 2005

· Kenneth Lewis to be CEO – Fleet’s Charles Gifford to be Chairman

· Paying a 43% premium for Fleet and 2.8 times book value

· National Processing:

· Acquired National Processing for $1.4B

· With acquisition, making BofA No.2 in merchant processing with 17% market share of Visa/MasterCard transactions (First Data is No.1 with 53%)

· Selling its Fund-to-Fund Finance unit to Societe General – Vehicle used to invest in hedge funds – February 2005

· 5.8% stake in Banco Itau of Brazil

· Acquired a 9% stake in China Construction Bank for $2.5B – China’s largest mortgage lender – Announced June 2005

· BofA will continue to maintain its stake with an influx of up to $500M to keep its stake after China Construction Bank goes public in late 2005

· BofA’s stake can go as high as 19.9% till mid 2010 (Max in China is 20%)

· This is BofA’s first big entrance in China – Has branches in Macau and Hong Kong

· MBNA:

· Acquired MBNA for $35B – Announced July 2005

· MBNA is the third largest credit card issuer in the US

· BofA is expected to lay off 6000 jobs and take a $1.25B restructuring charge

· BofA will become the largest credit card issuer in the US with a 20% market share

· MBNA had $82B in loans outstanding in 2004 ($17B of the $82B from bank-branded credit cards including $6.5B from Wachovia, one of its clients)

· US Trust:

· $3.3 billion acquisition

· LaSalle Bank:

· $21 billion acquisition in September 2007

· With the combination of LaSalle, Bank of America will now hold 9.88% of the total U.S. deposits.

· Federal law prohibits any single bank from holding more than 10% of the U.S.’s total deposits but there is a loophole. The 10% limit does not apply to federally chartered thrifts.

· Countrywide Financial Corp.:

· Acquiring Countrywide Financial Corp. in a $4B takeover – Announced January 2008

· Bank of America gave a cash infusion of $2 billion to Countrywide in August 2007 when the cracks of the subprime meltdown of 2007/2008 began to arise. The $2 billion was in the form of preferred shares convertible to a 16% stake in countrywide with first write to refusal for buying the remain shares of Countrywide.

· “The ability to get that kind of size and scale became more appealing as we saw the business model change to a model we could accept. We considered the lawsuits, the negative publicity that Countrywide had. We weighed the short-term pain, versus what we think will be a very good deal for our shareholders” – Kenneth D. Lewis, Bank of America CEO – January 2008

· B of A sent 60 analysts to Countrywide in December 2007 to analyze their financial and legal standing. In 2006 Countrywide was valued at $24 billion

· Countrywide was the largest mortgage lender with a 15.5% market share

· Countrywide savings bank held roughly $79.5 billion in loans and investments as of September 30, 2006. Of the almost $80 billion, three-fourths of those loans were either adjustable rate mortgages or second-lien loans

Bank Of America General Info:

· BofA has roughly 10% of all US deposits – A limit by US law

· With its restriction – will be forced to look for growth overseas in the mid to late decade of the 2000’s

· Dec. 2000 – Disclosed that it has $1B in un-collectible debt rumored to be from Sunbeam

· In 2001 - Had $2.4B in un-collectible loans and expected that to go to $3B by the end of 2001

· 2007:

· Had 6,149 branches and almost 10% of the U.S. total deposits.

· CEO Hugh McColl retired in April of 2001 – Kenneth Lewis replaced him

· Stopping subprime lending practices

· Return on average equity:

· 2002 – 19.4%

· 2Q2003 – 21.9%

· Loan Breakdown – 37.4% total commercial loans, total consumer 62.6% (37.1% Residential First Mortgage)

· Tier One capital ratio internal target of 8%

· At the end of 2007, its ratio was 6.87%.

· Bank Of America Merchant Services

· Second largest bankcard merchant – Performs one in five Visa/MasterCard transactions in the US

· Largest check processor in the US

· Largest debit card issuer in the US

· Fourth Largest Credit Card issuer

· Strategic Solutions Inc. – Subsidiary

· For problem loans

· Sells off the loans or repayment schedule

· Provides tax benefit for BofA

· Took a $231M charge related to Enron

· October 2002 – Seeking approval for energy trading

· Lead syndicate to Adelphia Communications which currently is in Chapter 11

· Settlement and Lawsuits:

· BofA paying $375M in SEC settlement and $125M in civil penalties from civil fraud charges relating to improper mutual-fund trading – March 2004

· WorldCom Settlement – March 2005

· Settled Class Action suit alleging that they did not perform due diligence regarding WorldCom’s financial well being while marketing WorldCom securities and offering favorable recommendations on the company

· Settled for $460.5M ($6B total was obtained from multiple companies involved in the settlement)

· Promising to achieve $250M in cost savings in 2004 and $1.1B in 2005 with the merger of Fleet First Boston

· Investing $600M in Corporate and Investment Banking Unit in US, Europe and Asia – October 2004

· Will BofA be able to make more acquisitions?

· With the acquisition of LaSalle in September 2007, BofA will hold 9.88% of the U.S.’s total deposits. Federal Law prohibits any bank-holding to company from controlling more than 10% of the U.S. total deposits but there is a loophole. It doesn’t apply to federally charted thrifts.

· Bank of America and the subprime and structured finance fallout of 2007/2008:

· Bank of America took $4Q2007 loss of $5.4 billion in the quarter relating to losses. $5.2 billion of that from CDO’s

· They still have $12 billion worth of subprime mortgage related securities in their portfolio in January 2008.

· “It’s back to basics” – CFO Joe Price, January 2008.

Bank Boston (BKB) (FBF)

· Merged With Fleet Financial – See Below

· Bought Robertson Stevens investment banking unit from B of A

· Constructed a $100M office tower in Buenos Aires to serve as headquarters for the bank’s Argentine operations

Brokerage	Recommendation	Sentiment
Merrill Lynch
Morgan Stanley
Prudential

Bank One (ONE) Chicago, IL CEO James Dimon http://www.bankone.com/

· Sixth largest bank holding company in the US

· Segments and revenue breakdown:

· Retail Banking – 37% of revenue

· Commercial Banking – 24% of revenue

· Card Services - 29% of revenue

· Investment management - 10% of revenue

· 3rd largest credit card issuer (First USA) with 51M cards in circulation

· First USA bought Wachovia Corp’s credit card business

· Return on equity:

· 2002 –– 15.2%

· CEO J.B. McCoy was replaced, some blamed him for the problems in late 1990’s

· Mr. McCoy said at one point he doesn’t understand mutual funds and other financial business operations

· Industry laggard – not keeping up, not acquiring - running like a plain vanilla bank – one observer in 1999

· Merged with First Chicago in stock swap valued at $29.6B

· Credit Card Services:

· First USA credit cards – has had big problems in 2000 – No.3 in credit cards (#1- Citigroup, #2 – MBNA)

· Bought Wachovia’s $8B credit card portfolio for around $2B

· Credit Cards – Used to have an annual loss of $1M – Had $1.12B in profits in 2002

· Has issued 51M credit cards and unit accounted for 30% of 1Q2003 net income

· Taking a 65% stake in Polaroid for $225M

· Being acquired JP Morgan Chase for $58B in stock – January 2004

• Will become the second largest bank after Citigroup
• Name will be changed to JP Morgan
• JP Morgan’s CEO William Harrison will be CEO, in 2006, Bank One’s James Dimon to be CEO
• Expecting a $2.2B in cost savings

· Will have 2330 branches

Brokerage	Recommendation	Sentiment
Smith Barney
Merrill Lynch
CSFB

Bear Stearns Cos. (BSC) NY, NY CEO James Cayne http://www.bearstearns.com/

· Three core business segments

· Capital Markets – Equity and fixed income sales, trading, research and investment banking

· Wealth management – Private Client and asset management

· Global Clearing Services

· Merchant Banking Arm

· Acquired Lerner New York from Limited Brands

· Acquiring Vitamin Shoppe Industries for $30M

· 2002

· Pre-tax profit margin of 28%

· Underwrote $98B in mortgage bonds

· Return on equity – 18.1%

· Biggest player in the mortgage-underwriting business

· No.4 player in Municipal Bonds

· 2003 – On track to underwrite $33B in Muni bonds

· “We’ll underperform if we go back to the insanity of 1999 and 2000, but if equity picks, we’ll do as well as anyone else because of our stock clearance, specialists and wealth management business” – William Spector – President

· Bought CamelBack for over $200M in 2003 – The water back-backs are used by bicyclists and saw a huge resurgence from military personnel in Iraq.

· Bear Stearns Merchant Bank:

· Bought a 50% stake in popular jean maker “Seven for all mankind” – October 2005

· 2007/2008 subprime fallout:

· Two Hedge funds collapsed

Brokerage	Recommendation	Sentiment
Merrill Lynch
Smith Barney
Prudential

Charles Schwab Corp. (SCH) San Francisco, CA CEO Charles Schwab http://www.schwab.com

· Subsidiaries include: Charles Schwab & Co., US Trust Corporation, Schwab Capital Markets, CyberTrader

· Has $1Trillion in assets under management and 7 million active accounts

· Acquired U.S Trust Co. in May of 2000 for $3.2B (Closed at $2.7B)

· Represented a 60% premium

· Only 945 of US Trust’s clients transferred their accounts to Schwab

· US Trust was a strong wealth management/trust firm for the ultra wealthy in the East Coast

· US Trust margins in 2QQ2004 – 6% (Northern Trust – 37%, Citigroup Private Clients – 44%)

· Earnings and stock price hugely dependant on trading

· 2002 – 34% of revenue came from customer trading

· In 1996, Schwab earned an average $69.08 a trade. In 2002, down to $37. 78 a trade

· Even if trading levels rebounded to levels in the mid 1990’s, revenue would be way down because commission rates have fallen so far

· End of 2002 – Has eight million accounts – record

· Return on equity – 3Q2003 – 12%

· Acquired Sound View Technology for $321.3M – Securities firm know for their tech-stock research – November 2003

· Sold Soundview and Capital Markets to UBS – September 2004

· CEO David Pottruck fired and replaced by Charles Schwab – July 2004 – was CEO for 14 months

• Charles Schwab says he’ll remain CEO until at least 2007

· Closing 53 of their 339 branches – August 2004

· Only 5% (Roughly 175,000) of Schwab’s 3.5M accounts have investible assets of $1M or more

· 4Q2004 – 177,700 revenue producing trades a day – Was 161,700 in 4Q2003 and 3Q2004 – 128,100

Chase Manhattan (CMB) (JPM) NY, NY CEO Walter Shipley http://www.chase.com/

· Now called J.P. Morgan Chase – see below

· Formed through merger of Manhattan Co. and Chase in 1955

· Nations largest in 1997

· Chemical Bank acquired Chase in 1996 and took its name

· Bought Hambrecht & Quist for $1.35B

· Bought Robert Flemming – UK Investment Bank – for $7.7B

· Bought Seoul Bank

· Chase Capital Partners – Venture arm

· 4^th largest credit card issuer among the banks

· Acquired J.P. Morgan for $36B – deal later valued at $25.4B

· Will have $675B in combined assets

· Will have lots of overlap

· Will cut 3000 jobs, about 3% of the workforce, affecting traders, bankers, and support staff

· Acquired the Commercial Credit Card Unit of Payment Tech Inc.

· Has 230,000 accounts

· Specializes in corporate credit cards through which the customer can manage their accounts online (Expenses and procurement)

· 4/5^th’s of Chase’s revenues come from their wholesale business (syndicate lending, venture cap, trading, underwriting and acquisitions advisory work)

Brokerage	Recommendation	Sentiment
Prudential
AG Edwards
Merrill Lynch

Citigroup (C) NY, NY CEO Vilkram Pandit www.citigroup.com

· Formed March 1998 with merger of Travelers and Citicorp - $72.5B merger

· Formerly Citicorp (CCI) and Travelers (TRV)

· John Reed (CCI) lost the CEO spot to Sandy Weill (TRV) in very public, political infighting after the merger – Originally planned to be Co-CEO’s

· Largest bank is the US measured by assets in 2005

· 2007 – Fell to number three.

Citigroup Five Units:

· Citigroup Global Consumer Group

· If it were a separate company, it would be a Fortune 10 corporation

· Comprised of:

· Citibanking

· Cards – 120M card

· Launched Home Depot and Shell credit cards in 2003

· Include : AAdvantage, AT&T Unive3rsal, Diners

· Citicapital

· CitiFinancial - Home equity loans, personal loans, and debt consolidation

· Primerica Financial Services

· Global Corporate and Investment Banking Group –2002 $3.0B in net income – 22% of total

· Global Equities

· Global Fixed Income

· Global Investment Banking and Global Relationship banking

· Global Security Services

· Citigroup Cash, Trade and Treasury Services

· Smith Barney

· Global Investment Management

· Citigroup Private Bank

· Citigroup Asset Management

· Global Retirement Services

· Travelers Life and Annuity

· Citigroup Alternative Investment

· Citigroup International

Citigroup Acquisitions and Stakes:

· Bought Thai’s First Bangkok and Korea’s First Bank

· Going all out to own Asia – Philosophy in the late 1990’s

· Owns 20.8% of Nikko Cordial Corp of Japan – Japan’s 3^rd largest brokerage firm

· June 2004 – Reduced stake to 12% - Sales generated roughly $920M

· 2007 – Paid over $10 billion to buy a controlling stake.

· 2008 - Buying out Nikko Cordial’s the remaining minority shareholders in a share swap valued at $5 billion. Originally signed in October 2007.

· Merged with Travelers Group for $72.5B in 1998 – Merger made Citigroup the world’s largest and most wide ranging financial service company at the time.

· Acquired Associates First Capital Corp. for $29.83B in November 2000

· First Capital made Citigroup the nation’s biggest publicly traded consumer finance corp. Heavily into sub-prime lending

· Mr. Weill wants to grow consumer finance – “This will more than jump start it”

· In 1998, acquired Confia Bank of Mexico – Now the bank (Confia) wants to pay back a $2.5B loan early in which Citibank will lose $300M in interest payments – Still not settled

· Fannie Mae – Citigroup has a 6% stake in Fannie Mae

· Taking a full stake (100%) in Afore Garante of Mexico – had a 91% stake

· No.4 in pension funds in Mexico

· Acquired Long Island Bank from EAB for $1.6B (European American Bank – Dutch) – February 2001

· Acquired Grupo Financiero Banamex Accival SA for $12.5B – August 2001

· Banamex has 1300 branches

· Will have 25% of all deposits in Mexico

· Will be the No.1or No.2 player in Mexico for all banking products

· Has $8B invested in Japan and earns about 8% of its global after-tax income from Japan - $1.3B in 2001

· Citigroup is No.3 in consumer financing in Japan including unsecured loans and real-estate

· CitiInsurance – sells variable annuity life insurance in Japan

· Acquired Golden State Bancorp of San Francisco for $5.8B – November 2002

· Golden State is the parent of Cal Fed – the 2^nd largest thrift with 353 branches and $54B in assets (Washington Mutual No.1)

· Will make Citigroup the 4^th largest consumer bank in California

· Golden State also control First National Mortgage – making Citigroup the 6th largest in mortgage service

· Includes 352 retail branches

· Sold its Diner Club credit card operations in most European countries except Hungary and Greece to GTP holdings of Italy

· In 2003 – Had secret talks to merge with Deutsche Bank

· Acquired a minority stake (4.62%) in Shanghai Pudong Development Bank in China for $67M – May 2003

· Has right to buy up to 24.9% from 2006-2008

· Shanghai Pudong Development Bank is one of the four listed banks in China

· Acquiring Sears Credit Card and Financial Products Business for $3B – July 2003

· Has 25M active accounts and pulls in $29B in credit card receivables

· Now the nation’s largest player in private label credit cards increasing receivable to $33B from $16B

· Acquiring KorAm Bank of South Korea for $2.73B, a 17% premium – March 2004

· Has 200 branches and 43T won ($36.6B) in assets

· Korea’s sixth largest bank

· Sold its 20% stake in Samba Financial of Saudi Arabia for a $756M gain – July 2004

· Acquired Knight Trading Options Unit for $225M – August 2004

· Acquiring First American Bank from Adam Corp – 102 full service banks across Texas

· Citigroup Venture Capital – Acquiring the non-memory chip operations of Hynix Semiconductor for $828.4M – October 2004

· Will form new venture named MagnaChip and produce chips out of its five factories for display for Gameboy’s and the types

· Will launch it as an IPO

· Selling Travelers Life and Annuity for $11.5B – February 2005

· Travelers was spun-off August 2002 and later merged with St. Paul

· Sold to Met-Life for $11.8B – July 2005

· Banned by the Federal Reserve on making any acquisitions until Citigroup fixes all of their regulatory problems – 2005

· Acquired the credit card business from Federated Department stores and Macy’s for $760M. Combined the two have roughly 17M active accounts – June 2005

Citigroup Overseas and Outside the US:

· Widely successful Japanese retail-banking operation

· People lined up to open accounts when they first entered the market

· Deposits grew 50% in 1997

· Growth in Japan accounts for roughly 20% of Citigroup’s overall deposit and growth

· Citigroup waives withdraw of money unlike the Japanese banks

· Invested in 79 emerging markets – representing 18% of earnings – wants it to be 30% by 2006

· Manages pension funds in 11 Latin American countries – Has 1.9M clients and $1.4B in assets

· March 2002 – Providing foreign currency services in China – First foreign bank to do so

· Offering them in their Shanghai branch – later will offer in Beijing, Guangzhou, and Shenzhen

· Banamex – Mexico

· Citigroup is the largest corporate and retail bank in Mexico – Mexico generated more than $1B in earnings in 2002 second most profitable outside the US after Japan

· Banamex unit contributed $1.45B or 8% to Citigroup’s total bottom line in 2003

· Banamex is Citigroup’s most profitable foreign operation and controls 40% of Mexico’s credit card market share

· First foreign bank to issue credit cards in China in which US dollars or the Yuan can be used to pay the bill. – February 2004

· Only 25M of China’s 1.3B people hold a credit card

· Opening its first branch in Singapore – Announced June 2004

Citigroup Notables:

· Return on equity:

· 2001 – 19.7%

· 2002 – 18.6%

· 2002 Global Breakdown: North America 60% of income, Asia, 10%, Japan, 8%, Mexico, 9%, Western Europe – 7%, CEEMEA – 6% - 2002

· 3Q2003 – Net income rose 20% - Its highest quarterly earnings ever recorded

· 3Q2003 – credit card loans outstanding - $114.13

· 2003 – No.1 for Global Debt and Underwriting with 10.2% market share (No.2 Morgan Stanley 7.4%, No.3 Merrill Lynch 7.1%)

· No.2 in Global Equity with 10.6% market share (No.1 Goldman Sacs 11.9%, No.3 Morgan Stanley 10.1%)

· 2004 – No.1 in Junk bonds, No.2 CSFB

· 2007:

· Ranks 12^th in Number of branches

· Number five among U.S. banks in total deposits with a 3.7% market share.

Citigroup General Info:

· Nikko Salomon Smith Barney – Japanese investment banking arm with Nikko Securities

· Now No.1 underwriter in Japan

· CitiTrade – Online brokerage

· c2it by Citibank – New internet cash messaging and transfer service – will be able to transfer funds with e-mail – will be free for the 1^st three months then $2 a transaction thereafter

· Will be marketed under AOL quick Cash

· Will cost 1% - 2.2% of the amount transferred with a minimum of 50 cents

· Revitalizing its Diner Club Credit Card and Carte Blanche – Diners Club has 8M cardholders worldwide and was the very first credit card in existence

· Will cater to corporate entities and the very rich

· Aimed at the American Express Platinum card

· Benefits include free companion ticket on British Airways, bookings for 200 of the most famous golf courses, concierge, and free international cell phone rental

· CitiFinancial – Subprime lending – includes Associates First Capital Corp (Dallas Subprime lender)

· Salomon Smith Barney

· Split off Salomon Smith Barney into just Smith Barney – Will be their Global Research and Brokerage Unit – Sallie L. Krawcheck to run the new unit

· Split off in response to sentiment of biased research to obtain lucrative investment – banking deals

· No. 1 Credit Card Issuer – (No.2 MBNA, No.3 First USA(Bank One))

· Has $8.8B in loan loss reserves

· 782 Branches in North America - 2003

· Long standing goal of doubling earnings every five years

· Enron and Argentina cost them around $700M - 2001

· Busted along with JP Morgan Chase for helping Enron create fraudulent vehicles to hide Enron’s losses

· Had to only pay $120M for their part in the deception ($101M for Enron and $19M for doing the same thing with Dynegy)

· Officially labeled as disgorgement

· “If loses start to escalate on them rapidly, it will take a bigger bite out of earnings than at other banks with higher levels of reserves” – S&P

· Prince Alwaleed bin Tala – Has $9B invested in Citigroup and their largest investor - He is also the largest single foreign investor in the US with $13B invested

· Retail operation generate about 60% of the company’s profit

· “The real long-term growth opportunity for this franchise is Internationally” – Bob Willumstad – Citigroup Global Consumer Division

· Anticipating International profits can grow 20% annually from 2004 on

· Global consumer arm produced 59% of the banks overall profit in 2003

· Citigroup CEO Succession:

· Charles O. Prince took over the CEO position from Sandy Weill – Weill to be chairman till 2006

· Charles Prince was resigned from duty in November 2006 with stock and other compensation worth roughly $29.5 million

· Citigroup’s new CEO is Vilkram Pandit

· Vilkram Pandit took the reins December 2007. He held previous post at Morgan Stanley.

· Spun-off Travelers Property Casualty Corp (TPK) – April 2002

· “We have largely accomplished the strategic build-out in the US and are now ready to project our product and services globally” – Deryck Maughan – CEO of Citigroup’s International operations – February 2004

· “On the medium-term horizon, two or three years, well make money on rising rates” – CFO Todd Thomson – April 2004

· Very interested in increasing its proprietary trading activities in 2004

· Investor Lawsuits of 2004

· Citigroup paying $2.65B to Citigroup clients whose accounts held WorldCom stock due to it entering Chapter 11 in 2002

· $141.5M will go to fees and plaintiff lawyers

· Citigroup underwrote WorldCom securities and bonds and suit claims that Citigroup did not perform due diligence

· Jack Grubman (Citigroup telecom analyst) as at the center of this claim and said that he drove the price of the stock higher with favorable recommendations to gain business from Worldcom

· Citigroup paying $2B to settle class-action suit regarding Enron

· Japan – Busted by Japan’s Financial Services Agency and ordered to close its Private Banking Operations – September 2004

· Private Banking Operations Unit manages money for ultra high wealth Japanese clients

· Accused of possible money laundering, extended loans to manipulate stocks, and failure to disclose risk to its clients about derivatives, obstruction of justice

· Citigroup has had operation in Japan since 1902

· Vice President of International Operations, Deryck Maughan, fired October 2004 over the scandal along with CEO of Private Bank, Peter Scattuno and CFO Citigroup Asset Management m Tomas Jones

· Closing CitiTrust and Banking Group – Real-estate and trust banking operations in Japan

· Found compliance problems within the group – October 2004

· Investigations:

· Citigroup being questioned about its role in the collapse of Parmalat (Italian Diary) – 2004

· Being investigated on its dealing in Argentina

· South Korean Investigators looking at the Citigroup’s Private Banking Operation in South Korea for similar problems that occurred in Japan

· Private Banking problems in Japan – See Above

· Bond Trading problems in Europe

· Banned by the Federal Reserve on making any acquisitions until Citigroup fixes all of their regulatory problems – 2005

· Swapping it asset management operations (mutual funds) for Legg Mason’s brokerage business in a transaction valued at $3.7B – Announced June 2005

· Citigroup will give Legg Mason a $500M with a $1.5B swap of Legg Mason’s stock

· Some analysts claim the swap shows that Citigroup’s asset-management group too broken to try and fix. Others claim it was enviable due to conflicts of interest over brokerage being accused of pushing their own products (mutual funds)

· Swap could set a precedent in the industry for other to do likewise

· Citigroup will now have 13,500 brokers and be a very close second to Merrill Lynch’s 14,000 brokers

· Citigroup will keep its asset management units in Mexico and its retirement services in Latin America

· The name Salomon (Of Salomon Smith Barney, etc.) will likely remain with Citigroup but will be shelved – Salomon’s name was dropped in October 2002

· Asset management unit consist of roughly 80 funds with $120B in assets under management

· Citigroup retail branch expansion:

· Planned to open up to 100 branches a year throughout the U.S. starting in 2005 under then CEO, Charles Prince’s, new initiative.

· Mr. Prince wanted Citigroup to open 70 to 100 new branches a year to attract deposits and attractive loans through new customers with a larger footprint.

· Some of the new Citigroup branches would include Smith Barney Brokers which would align Citigroup as a one-stop shop and an integrated financial giant.

· 2008, halting the expansion and selling or closing some of the recent and lagging location where Citigroup has been unable to make inroads among its competitors.

· Number of retail branches:

· Had 1,055 branch locations in the U.S. at the end of 2007 and up 18% from the end of 2005. Citigroup had 414 branches in 2000

· Citigroup Executives leaving in the summer of 2005?

· Citigroup President Robert Willumstad announced he’s leaving Citigroup to start his own private-equity firm – July 2005

· Former CEO and current non-Executive Chairman, Sandy Weill, announced he too was leaving Citigroup to start his own private-equity firm in July of 2005