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Monday, October 30, 2006

Citigroup's Broken Game Plan (C)(BAC)

Almost everyone else has taken a swipe at Citigroup recently, so why not add the British egg-head weekly The Economist. The paper did not spare Citi’s feelings.

The paper made two critical points. One is that Citi's overseas consumer banking operation is going nowhere. Earnings for the unit are flat. While Citi has a lot of branchs outside the US, it does not have critical mass in most countries.

The second issue is Citi's consumer bank at home. In the US, several banks like Bank of America have more offices than Citi.

In short, Citi may be big in consumer banking, but it is not a concentrated share in any one place. Not enough to give it scale.

Citi's management is simply focusing in the wrong units. The company's investment bank and corporate lending units are areas where the bank can pack some muscle.

Indeed, areas of the bank like trading have been strong performers although they can be very cyclical. Wealth management has been a recent bright spot for the big bank. So, it remains mystifying why management would focus on a flagging consumer unit, no matter how large, instead of businesses that are doing well.

Investors are getting more impatient by that day. Citi's CEO may not have a lot more time to show that his strategy is working.

Douglas A. McIntyre can be reached at He does not own securities in companies that he writes about.

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