INTRODUCTION
CITIBANK:
Citibank is the consumer banking arm of financial services giant Citigroup. Citibank was
founded in 1812 as the City Bank of New York, later First National City Bank of New
York. As of June 2009, Citigroup is the fourth largest bank holding company in the
United States by domestic deposits, after Bank of America, Wells Fargo, and JP Morgan
Chase.
Citibank has retail banking operations in more than 100 countries and territories around
the world. More than half of its 1,400 offices are in the United States, mostly in New
York City, Chicago, Los Angeles, San Francisco/Silicon Valley, and Miami. More
recently, Citibank has expanded its operations in the Boston, Philadelphia, Houston,
Dallas, and Washington D.C. metropolitan areas, albeit with a mixed record of success.
It was reported that Citigroup executives were pleased with the performance of the
Boston branches, but were less impressed with the Philadelphia experiment, according to
a person familiar with the situation.
On September 24, 2009, The Wall Street Journal reported that Citi planned to narrow the
focus of Citigroup's U.S. branch network to just six major metropolitan areas, including
New York, Washington, Miami, Chicago, San Francisco and Los Angeles, where Citi has
a substantial presence but ranks no higher than No. 3 in deposits. The article also noted
that Citi could abandon or scale back where it is an also-ran, including Boston,
Philadelphia and parts of Texas, according to people with knowledge of the discussions.
In addition to the standard banking transactions, Citibank offers insurance, credit card
and investment products. Their online services division is among the most successful in
the field, claiming about 15 million users.
As a result of the Global financial crisis of 2008–2009 and huge losses in the value of its
subprime mortgage assets, Citibank was rescued by the U.S. government under plans
agreed for Citigroup. On November 23, 2008, in addition to initial aid of $25 billion, a
further $25 billion was invested in the corporation together with guarantees for risky
assets amounting to $306 billion.
CITIBANK IN PAKISTAN:
Citibank (Citi) has been operating in Pakistan since 1961 and has a highly respected
franchise through its successful delivery of innovative, high-quality banking products and
services to its clients.
Businesses
With over 1100 employees in Pakistan, Citi operates through two major business lines;
Global Consumer Group and Institutional Investors Group, providing a variety of
services to more than 200,000 consumer and corporate clients respectively.
Citi has steadily expanded its network over the last two years and now has 26 branches
and 39 customer contact points across 10 cities in Pakistan.
Community
Citi’s philanthropic arm- the Citi Foundation is committed to enhancing economic
opportunities for underserved individuals and families in Pakistan. Since 2002, the Citi
Foundation has given more than US$3.23 million in grants to projects focusing on
poverty alleviation through microfinance, education & financial literacy and
volunteerism.
Citi Pakistan has received the prestigious CSR National Excellence award for outstanding
Corporate Social Responsibility in 2007.
Achievements
Citi’s contribution to the local financial sector is centered on its commitment to its
customers be it through best in class products and services, transfer of expertise and
technology, innovation and its investment in its people.
Citi has many ‘firsts' to its credit including launching the first credit card in Pakistan,
pioneering Consumer Asset financing and introducing the first 24 hour, 7 days a week
call centre, launching ‘bancassurance’- milestones that have set a standard for others in
the banking industry.
Citi has also been at the forefront of the financial sector reform process and has been the
lead bank in taking the Government to international capital markets, including issues of
the first Foreign Currency Sukuk, the first 30 year US Dollar Sovereign Bond and the
first equity offering in over a decade. It is also the leading bank in Pakistan for delivering
Export Agency and Multilateral financing and has been instrumental in the development
of Pakistan's market for derivatives and other treasury products.
FINANCIAL & INVESTMENT ENVIRONMENT OF CITI BANK
GLOBALLY:
Following Citibank merger with the First National Bank, the bank changed its name to
The First National City Bank of New York in 1955, and then shortened it to First
National City Bank in 1962.
The company organically entered the leasing and credit card sectors, and its introduction
of USD certificates of deposit in London marked the first new negotiable instrument in
market since 1888. Later to become part of MasterCard, the bank introduced its First
National City Charge Service credit card - popularly known as the "Everything Card" - in
1967.
During the mid-1970s, under the leadership of CEO Walter B. Wriston, First National
City Bank (and its holding company First National City Corporation) was renamed
Citibank, N.A. (and Citicorp, respectively). By that time, the bank had created its own
"one-bank holding company" and had become a wholly owned subsidiary of that
company, Citicorp (all shareholders of the bank had become shareholders of the new
corporation, which became the bank's sole owner).
The name change also helped to avoid confusion in Ohio with Cleveland-based National
City Bank, though the two would never have any significant overlapping areas except for
Citi credit cards being issued in the latter National City territory. (In addition, at the time
of the name change to Citicorp, National City of Ohio was mostly a Cleveland-area bank
and had not gone on its acquisition spree that it would later go on in the 1990s and
2000s.)
Citibank in California had only a handful of branches before acquiring the assets of
California Federal Bank in 2002 with Citicorp's purchase of Golden State Bancorp which
had earlier merged with First Nationwide Mortgage Corp.
In 2001, Citibank settled a $45 million class action lawsuit for improperly assessing late
fees. Following this Citibank lobbied the United States Congress to pass legislation that
would limit class action lawsuits to $5 million unless they were initiated on a federal
level. Some consumer advocate websites report that Citibank is still improperly assessing
late fees.
In August 2004, Citibank entered the Texas market with the purchase of First American
Bank of Bryan, Texas. The deal established Citi's retail banking presence in Texas,
giving Citibank over 100 branches, $3.5 billion in assets and approximately 120,000 new
customers in the state. First American Bank was renamed Citibank Texas after the take-
over was completed on March 31, 2005.
Citi reported losing $8–11 billion several days after Merrill Lynch announced that it too
has been losing billions from the subprime mortgage crisis in the US.
On April 11, 2007, the parent Citi announced the following staff cuts and relocations.
On 4 November, 2007, Charles "Chuck" Prince quit as the chairman and chief executive
of Citigroup, following crisis meetings with the board in New York in the wake of
billions of dollars in losses related to subprime lending.
Former United States Secretary of the Treasury Robert Rubin has been asked to replace
ex-CEO Charles Prince to manage the losses Citi has amassed over the years of being
over-exposed to subprime lending during the 2002–2007 surge in the real estate industry.
In August 2008, after a three year investigation by California's Attorney General Citibank
was ordered to repay the $14 million (close to $18 million including interest and
penalties) that was removed from 53,000 customers accounts over an eleven year period
from 1992-2003.
The money was taken under a computerized "account sweeping program" where any
positive balances from over-payments or double payments were removed without notice
to the customers.
On November 23, 2008, Citigroup was forced to seek federal financing to avoid a
collapse, in a way similar to its colleagues Bear Stearns and AIG. The US government
provided $25 billion and guarantees to risky assets to Citigroup in exchange for stock.
This was the latest bailout in a string of bailouts that began with Bear Stearns and peaked
with the collapse of the GSE's, Lehman, AIG and the start of TARP.
On January 16, 2009 Citigroup announced that it was splitting into two companies.
Citicorp will continue with the traditional banking business while Citi Holdings Inc. will
own the more risky investments, some of which will be sold to strengthen the balance
sheet of the core business; Citicorp.
The idea behind splitting into two companies is so Citigroup can dump "the dead weight"
on Citi Holdings, allowing the prime assets of Citicorp to operate away from that of the
toxic assets.
FINANCIAL & INVESTMENT ENVIRONMENT OF CITI BANK
PAKISTAN:
CITIBANK N.A. from the start of its launch in Pakistan brought revolutionary concept in
Banking in Pakistan this is the first bank who introduced plastic money in Pakistan and
the first bank who introduced the Auto Finance in Pakistan. With its innovatory thinking
and brilliant new idea of banking to give the top most superior services its banking
services are at its top and unmatchable.
In Consumer Banking we introduced Auto Financing and Credit Cards. Home Loans and
Personal Loans. With the new concept of Wealth management with JS investments we
are launching our new Products the INVESTMENT PRIDE. CITIBANK N.A also
launched Online Banking, Internet Banking and PC Banking in 1990, offering a full
service, round-the-clock access to banking.
Citibank is the leader in international capital market transactions for Pakistani issuers.
Through the development of innovative financial products and the ability to successfully
tap international capital markets, Citibank has raised long term financing in the form of
Global Depository Receipts ("GDRs"), Euro-convertibles and Floating Rate Notes
("FRN")
Citibank has been the leading player in the syndicated loans business. It has nurtured a
diverse local investor base, demonstrated by its unmatched track record of raising
financing in excess of PKR 20 billion for the local market. Citibank is also one of the
leading players in the distribution business, which involves arranging syndicates for
Initial Public Offerings ("IPOs"), rights issues and distribution of term finance
certificates.
As a result of its involvement in these transactions, Citibank has achieved a clear
understanding of the various complex regulatory, legal and business issues, that form an
integral part of the capital markets business. Securitisation offers a strategic funding
alternative, since it allows for the conversion of assets, with strong cash flows, into a
capital source.
Citibank has pioneered both local and foreign currency securitisation transactions. It has
completed local currency transactions worth PKR 2.5 MMM. Moreover, Citibank
successfully arranged the first ever local currency future receivables securitisation in
Pakistan Citigroup is the world leading group.
It comprise of the 12 % of the total American Economy from the BENAMEX company
to the CITIBANK and from the CITISTREET to the SMITH BARNEY there is a limit
less structure of global chain of networking and excellent business skills.
In Pakistan Citigroup entered by the name of Citibank. The world leading bank steps in
the economy of Pakistan with a lot of new banking skills and innovation to teach the true
spirit of banking not only in Pakistan but in all over the world.
CITIBANK enhances its working by an introduction of EMEA Concept that means the
EUROPE, MIDDLE EAST, ASIA. This concept had been presented on and off by many
financial persons in late 60s but now it is the true time to implement this concept and
Citibank has a great responsibility to took this idea from the core keep its momentum
high
BANKING SECTOR OF PAKISTAN
Pakistan’s Financial Sector has shown strong resilience to a challenging macroeconomic
environment and global developments, says State Bank’s Financial Stability Review
2008-09, According to the Report, the size of the country’s financial sector, which
includes Banks, Non-Bank Financial Institutions (NBFIs), Microfinance banks, Central
Depository of National Savings (CDNS), the Insurance sector, and financial markets, in
terms of assets, has increased to Rs 8.2 trillion by end-June 2009 from Rs. 7.1 trillion at
end December 2007.
The report summarizes the developments over 2008 and the first of half of 2009. The
Report says that the stability of the financial system is largely derived from the
predominant position of the banking sector, as other components of the financial system
continue to grow at a more gradual pace. As opposed to the speculative tilt in conducting
the business of banking in western economies, the underlying operating model of the
banking sector in Pakistan fulfills the basic requirements of the function of financial
intermediation: loans and advances are funded by a large and growing base of deposits,
with virtually negligible reliance on borrowing, or the short term wholesale market for
financing assets.
The Report noted that the growth in deposits did slowdown to 9.4 percent in CY08 after
growing successively at an average rate of 18.1 percent for the last 5 years, despite the
increase of 17.2 percent (in USD terms) in home remittances; a reflection of both the
slowdown in the economy, preference for hard currency due to the prevalent environment
of uncertainty, and competition from the National Savings Schemes (NSS) offering a
higher rate of return than bank deposits.
“These developments even overshadowed the potentially positive impact of introducing
the minimum rate of return of 5.0 percent on all PLS savings deposits by the SBP, w.e.f.
June CY08,” it said and added a visible increase in the currency to deposit ratio and a
slowdown in the money multiplier during H2-CY08 also highlights the challenging
operating environment of the banking sector. Notwithstanding, deposits growth has
picked up pace in H1-CY09, growing by 8.2 percent in H1-CY09 alone. But the
impending transfer of government deposits from banks to a single treasury account
maintained by the State Bank of Pakistan can potentially have a significant impact on
those banks which have a large reliance on these deposits, it said.
ANALYSIS ON CITI BANK
RATIO ANALYSIS
1. Return on Average Assets = (Net Operating Income/ Total Assets)
2009
(Rs ’000)
118,849/101,651,827= 0.00116
2008
(Rs ’000)
1,130,939/92,468,851= 0.012
Comments:
Return on average assets measuring the profitability of a bank. The comparison of 2008
and 2009 shows the decline of 0.0108.
2. Return on Equity = ( Net Income/Stockholder Equity )
2009
(Rs ’000)
800,362/9,013,072= 0.088
2008
(Rs ’000)
259,681/6,325,911= 0.041
Comments:
ROE. A measure of how well a company used reinvested earnings to generate additional
earnings so the comparison of citi bank ROE shows an increased.
3. Rate Paid on Funds = Total Interest Expense / Total Earning Assets
2009
(Rs ’000)
118,849/13,432,726= 0.00884
2008
(Rs ’000)
1,130,939/7,051,616=0.16
Comments:
This indicates what percentage or rate of interest is paid from assets.
4. Net Interest Margin = Net Interest income/ Earning Assets
2009
(Rs ’000)
5,287,000/13,432,726= 0.393
2008
(Rs ’000)
5,960,700/7,051,616=0.84
Comments:
This shows how successful a firm's investment decisions are compared to its debt
situations. Citi bank comparison show a decline which means bank did not take optimal
decision.
5. Long Term Debt to Total Liabilities and Equity = ( Long Term Debt / Total
Liabilities plus Equity )
2009
(Rs ’000)
65,484,768/101,651,827=0.644
2008
(Rs ’000)
68,627,815/92,468,851=0.74
Comments:
It indicates what proportion of equity and debt the company is using to finance its assets.
The comparison show a decline.
6. Equity to Assets = ( Stockholders Equity / Average Total Assets )
2009
(Rs ’000)
9,013,072/ 101,651,827=0.088
2008
(Rs ’000)
6,325,911/92,468,851=0.0684
Comments:
The comparison show a increased in equity to asset ratio of a bank.
FREE CASH FLOW
Net Income
+ Amortization / Depreciation
-Changes in working capital
- Capital Expenditure
= FREE CASH FLOW
2009
800,362+4 27,212+1 6,610-(11,859,226)- 9,254,001= 3,849,409
2008
259,681+3 44,828+8 ,187-(7,780,132)- 3,768,274= 4,624,554
Comments:
Free cash flow is the amount of cash that a company has left over after it has paid all of
its expenses, including investments. The decline in the FCF shows that the bank had
made investment.
RECOMMENDATION
Enhanced focus on cooperate governance.
Restructuring/ Privatization of Banks.
Enhancing the Outreach of banking Services through Branchless banking.
Issuance of Global depositary receipts.
The bank should reduce the minimum amount of opening a bank account.
The bank should open its more branches.
Bank should expand its network of ATM, it should have ATMs at cinema halls,
shopping complexes, office complexes, etc.
The bank should also provide services on Sundays.
Bank should stress on telemarketing and on direct sales as well
