Core Values, Motivation & Mission: 1812-2056

Written May 10, 2006

Record Performance Data

1st Qrt. 2006 Income $5.6 billion

Share Price (C) May 9, 2006 $50.35

EPS 1st Qrt. $1.12

Int’l Revenues Up 19%

Share Repurchase $10 billion

Employees in NYC 26,809 *

Employees in US 148,000

Employees Worldwide 300,000

* – 2nd largest employer in New York City
to New York Presbyterian Healthcare System.

Net Income $20.4 billion **

Net Revenues $83.6 billion

Assets $1.5 trillion

Liabilities $1.4 trillion

Equity $113 billion ***

ROE 22.3%

Dividend per Share $1.76

Diluted EPS $3.82

** – Excludes gain on sale of significant operations.

*** – Excludes Trust Preferred Equities.

Primary Motivation

Good instinct for making money through rational, logical and practical application of banking principles in domestic and international markets. Efficient at maximizing income even from small transactions.

As Seen by Others

Industry leader known in the marketplace for creative problem solving, building relationships and being loyal to long standing trustworthy associations – the world’s bank.

Operative Goals

Driven to improve modus operandi by advancing operating machinery, infrastructure and apparatus embedded in people, technology and best practices among industry leaders. This drive to maintaining, sustaining and honoring effective operating infrastructure, policies as well as cohesive, interrelated and interdependent, yet smoothly independent geographic diversity is Citigroup’s key to building shareholders’ value, meeting client needs and adjusting to supply and demand factors in the global marketplace.

Secret of Success

The unwritten and oftentimes unknown secret to Citigroup’s success is deep and profound respect for people, institutions, governments and localities in which it operates and serves. This drove Citibank’s success in the early years after inception in 1812 by meeting the needs of a rapidly expanding American economy, which continues to fuel growth in the largely expanded Citicorp and later Citigroup of the 20th Century by offering an innovative and diversified portfolio of financial services and products in vastly different geographic regions and operating environments in the United States and aboard.

Legacy of Respect

Envisioning the amorphous quality of respect is difficult among Citigroup employees since it forms the fiber of their very existence driving transactions from the backseat as reflected in a cultural heritage that goes back to the Bank’s way of doing business since inception. What happens is that often the Bank is caught in the web of its own pioneering inventiveness. To leap forward, a Company must take risks. The Corporation throughout its history has never shied away from that challenge, leading rather than reacting to the needs and necessities of the times.

Despite its high standing and outstanding reputation in domestic and international markets, whether referred to as Citigroup, Citicorp, Citibank or just plain Citi, the Corporation was never really associated with the prestigious, mighty and powerful among financial institutions on Wall Street even though it possesses these qualities and expresses them in everyday operations. Rather Citigroup is seen as a player on the block, a bank that can be approached with any banking, brokerage or cash management need knowing that service will be second to done delivered to meet or exceed expectations.

This sense of “locality,” a sense of being “one of us,” has driven Citigroup’s success from era to era throughout the past 194 years making Citigroup the first choice among consumers, corporations, government and not-for-profit organizations, because it provides a sense of community of being not far away, just a few blocks down the road.

The people at Citigroup add to this dimension. Citigroup’s strong emphasis on diversity supports core values that are reflective of our times as well as the communities and environments in which the Bank operates. Again, Citigroup leads.

Source of Energy

Citigroup is a communications company in the sense that the efficient, smooth and free flow of information is vital to its success. Whenever there is a bottleneck or problems with communications, Citigroup suffers.

Communication is that the heart of the Company’s operations, products and services. Communication processed through modern technology, the internet and old fashion word of mouth recommendation drives success at Citigroup and will continue to do so long into the future.

The challenge the Company faces is maintaining open, clear and effective lines of communication during times of explosive or transformative growth that occur ever so often by new generations of managers that envision the need for fundamental change in strategy and core values to meet the needs of the times. When done effectively, Citigroup soars effortlessly to new heights of achievement and social responsibility.

When blocked, ineffective or mismanaged, the Company suffers grave setback that requires a new generation of managers to realign the Group back towards core values in order to gain new perspective and vision.

It is never the goals or objectives that sabotages needed change, but the inability of the Company or nucleus of its leadership to clearly get its message out, accepted, understood and supported by all concerned, least of whom includes staff, clients, shareholders, standard setters and banking regulators.

At times, communication poses problems for the Group especially where sensitive issues are concerns. These might include the environment, corruption and ethics to name a few. Oftentimes there is obfuscation of the truth due to its pioneering tendencies to be the industry leader that put Citigroup at the forefront of innovation and change long before the competition and regulators fully grasp essential elements that characterize more subtle or complex financial transactions.

The problem here is not Citigroup’s lack of desire to communicate, but rather an outcome of the naturally slow development of its own understanding of the full implications and requirements of what it seeks to achieve, which unfortunately, in an instantaneous media driven world, is understood too often by all at exactly the same moment in time with consequential positive and negative outcomes.

Citigroup needs to more fully recognize the role that it plays when entering new frontiers, breaking new grounds or redirecting the Corporation to meet the demands of the times.

It is not a call for conservatism or prudence, developed concepts that are well embedded in modern financial thought and practice, but a call for further innovation through internal development of guiding intellectual capital not yet undertaken in a strong way by the banking industry.

To be Citigroup in the third millennium means literally to be standing at the edge of life and death with only one option available, that of life, where mistakes made in the modern medium of time are oftentimes neither forgotten nor forgiven.

As a 194 year old organization that spans many cultures, economic times, national, regional and global barriers and interests, Citigroup needs to take the lead in managing its own process of change by developing in-house capacity for developing and implementing economic, financing and accounting decisions-making theories and practices that are ahead of the thought processes of regulators and standard setters in the US and aboard.

This means, in this millennium, hiring the best in the field and staying at the top and on the edge of the curve of policy change – oftentimes leading the way instead of reacting to bureaucratic regulations and accounting policies developed from acclaimed finance and economic theories and concepts that could have adverse effect on the Group’s existence and enormous earning power. This will become more important as Citigroup expands into international markets where the need for guidance, prudence, conservatism and disclosure are more urgently needed than in more developed markets. (Of the 238 new branches opened in first quarter 2006, 202 were in international markets with only 36 in the US.)

The key to being at the cutting edge of change is to consider the impact on the least common dominator (LCD) with which Citigroup operates. Defining and meeting the communication needs of the least common denominator in each new transaction or global transformation initiative will help Citigroup set standards of communication in support of its singular industry leadership position.

Source of Strength

Citigroup is one of the few financial institutions in the world that is adept at functioning in turbulent economic and political situations while maintaining a strong sense of balance, prudence and confidence in its own ability to meet client needs at the highest level of ethics and business practice, even when those that judge in hindsight seek new grounds for justifying myths of truth that are oftentimes outdated.

In this regard, much of Citigroup’s success can be attributed to strong discipline through sound business practice over time. This coupled with effective communication and service to the local and business community drives Citigroup’s creativity to achieve lasting results that goes beyond transitory fads – constantly setting standards in the industry for others to follow.

Innovation Through Partnering & Meeting Clients’ Needs

Citicorp relies on innovation to meet the changing needs of its client base. Much of this innovation comes through partnering where mergers and acquisitions play a vital role. The changing needs of clients force Citigroup to innovate new products and services to satisfy demand. For this reason, Citigroup should have a clear vision of its core values, strengths and weaknesses even when such is in a constant state of flux (spanning every other generation, which occurs every 40-42 years) due to internal and external pressures.

This means that some of today’s critically profitable businesses such as credit card may fall off precipitously within the next two to twelve years forcing the Group to reinvent itself finding new but equally strong ways of increasing profitability to build and maintain shareholders’ value.

Pioneering gold-backed local currency financing in emerging markets, globally oriented multi-language, multi-currency internet banking and decentralized full service banking and investment centers are but a few ways that tomorrow’s leaders will define modern banking relationships.

The limit lies within the imagination of Citigroup’s leadership to manufacture new banking possibilities to serve more people at lower cost for higher value with improved profitability resulting in growing and sustainable shareholders’ wealth.

Until a door is opened, the portals of the imagination are closed.

To achieve a vision that meets the needs of this Century, Citigroup must recognize that it is most powerful and successful at innovations when it seeks to meet customers’ needs as oppose to innovating for the sake of innovation. The latter may have strong short-term impact, but troublesome or uncertain long-term realities and consequences.

Citigroup is most successful at innovation when ideas are tested and developed in-house rather than imported from the competition or industry trends in general. This means that no matter how successful Citigroup may seem to the outside observer, for Citigroup to lead in this area, the Bank must not only be confident in the products and services that it offers the public, but more importantly in its own ability to deliver same at the highest level of professionalism, accounting and banking standards as well as regulatory practices and requirements. Whenever Citigroup missses this mark, it shall fail in that endeavor.

Creating & Maintaining #1 Status at Citigroup is not a Luxury; it is an Absolute Necessity

Citigroup’s identity will not stay constant over time.

Revolutionary change at the structural level is constantly finding new forms of expression. Predicting Citigroup’s operations and activities for this Century will be difficult and prone to mistakes and errors by any competent business and astro analyst.

Looking back at the Corporation’s long history, it would not be an overstatement to state that as a financial service provider, Citigroup, or whatever it chooses to call itself in the future, will need to be #1 in every field of its operations with strong focus on serving the “common man” (i.e., average client or least common denominator) by delivering products and services that meet society’s aspirations for outstanding banking and financial service or risk dilution of profits and deterioration of shareholders’ wealth.

This means that in every case, whether it is basic checking account services, stock brokerage, asset management, domestic/international project finance or 56k-modem internet banking, Citigroup franchises must be #1 in its class to avoid undermining the rest of the Bank’s powerful cash regenerative capacity.

The case to be made that strongly demonstrates this point is that within one year of opening its door on Monday, September 14, 1812, City Bank of New York paid its first dividend. Excelsior embolden in this spirit of success for investor remuneration should be the yard stick that spurs internal and external competition in order to carry Citigroup’s flag to higher levels of satisfaction and accomplishments in the 21st Century. Achieving and maintaining #1 position in the global banking industry is very important for the long-term survival of Citigroup, making it difficult or near impossible for future managers to break-up a winning team.

Future Outlook

The next fifty (50) years when Citigroup will approach 250 years old will be a defining and critical period for the Corporation up to and after the period 2058-2062 when the Group will literally reinvent and redefine itself in line with radical global changes that will occur between now and those dates in science, arts, technology and human social affairs and values. The size of global population, development, use of natural resources, environment, space exploration, water and the seas and development in North Pole and Antarctica will shape banking practices, products and services providing enormous opportunities for growth and increased shareholders’ value.

Building on past successes in leadership, innovation, generating earnings through hard work and through the restricted or limited use of cash and cash equivalents, Citigroup, as it is now called, will have the opportunity to produce phenomenal profits for its shareholders where the largest majority may be employees of the Group bringing to fruition its mission or vision of changing how money is used, applied and valued in modern societies. However, achieving these goals will not be easy. The challenges ahead are enormous but not insurmountable. Citigroup is poised and well prepared to successfully meet the challenges of the future.


Funding is an area that the Bank for the most part has taken for granted due to enormous resources available to it to meet asset delivery, financial service and debt service requirements. To grow more efficiently and successfully globally, Citigroup will need to undertake an exhaustive study of funding options available to it in international capital markets giving strong emphasis on how new instruments and alternative sources can provide: 1) lower debt service cost, 2) better liquidity, terms and conditions as well as options for refinancing, and 3) aide in better meeting client needs by developing or enhancing financial products and services.

It appears that should Citigroup reevaluate its strategy to obtain funding in international capital markets at lower costs, that it could improve profitability, reduce financial risks and possibly offer new products and services to bolster its international character and image in the global marketplace.

The Dreaded Insurance Dilemma

Developing a product mix of the “holy trinity” of 1) banking, 2) insurance and 3) investments to serve 1) consumers, 2) corporations and 3) governments in 1) domestic, 2) regional and 3) global markets present enormous risks, challenges and opportunities that can only be exploited by a financial institution such as Citigroup provided, however, that banking and investments act as positively and negatively charged cornerstones of the Group’s investment strategy and operations, and the more nebulous, grossly misunderstood, yet vastly important, insurance component acts as a third swing element, bridging the gap and needs between those two outer corner posts in helping to close deals, protect and preserve the value of Citigroup’s assets and investments, meet liabilities and commitments, increase profitability, enhance shareholders value, and thereby through this process of intermitting transmissions, enlighten the path to further growth and development in global financial markets.

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