Citicorp Fights to Rise Again

By Thomas McCarroll/New York

While most U.S. banks are trimming their global ambitions, America's biggest banking company is showing few signs of retreat. The 178-year-old Citicorp, ! once ranked as the world's largest bank in assets, lost that title to Japan's Dai-Ichi Kangyo Bank in 1986 and slumped to No. 11 in FORTUNE's 1990 ratings. As it stumbled in one market after another, the firm also lost some of its aura of invincibility, but it remains stubbornly committed to maintaining an international presence. Says John Reed, 51, the bank's youthful-looking chairman: "We want to be global, and we want to be powerful."

Citicorp is still the most wide-ranging bank in the world. It has more overseas offices -- 2,200 -- in more countries -- 89 -- than any other. It has more customer accounts -- 20 million worldwide -- including some 1 million in Asia and more than 8 million in Europe. Fully 10% of all Belgian households bank at Citicorp, as do 5% of those in West Germany and 3% in Britain. Its 300-branch consumer bank in Dusseldorf primarily serves factory workers. The firm's New York City-based Private Bank caters to wealthy individuals, offering such services as art-investment advice and estate planning. Citi's corporate customers, says Reed, include "the Daimler-Benzes of the world, the Toyotas of the world, the Exxons of the world."

But the competition has stolen away some of Citicorp's top-drawer clients. The bank was taken aback recently when it lost Marriott Hotels, a longtime corporate customer, to a group of Japanese rivals. Citi has also watched nervously as competitors expanded their American beachheads. Britain's Barclays Bank is enlarging its U.S. operations to target multinational firms, many of them Citicorp customers. Of all the rivals on Citi's turf, Reed considers Deutsche Bank "the biggest and most formidable" because of its commanding presence in Europe.

Citicorp has only itself to blame for many of its problems. It led the ill- fated charge by American financial institutions into the London equities market in anticipation of the 1987 "Big Bang," which deregulated the British securities industry. When the overcrowded market proved to be a disappointment, Citi dissolved its London equities business, losing $65 million; 140 people lost their jobs. Citicorp was also the leader in Third World lending. Today the bank has some $8.4 billion in outstanding loans to less developed countries, or LDCs. Since 1987 Citi has been forced to write off or set aside reserves of $4 billion to cover bad LDC loans. Last year its net earnings plunged by 73%, to $498 million, partly because Brazil failed to make a $250 million interest payment.

Wall Street is even more concerned about the company's problem loans at home. In the wake of the bankruptcy of Canadian raider Robert Campeau in January, analysts began to worry about Citicorp's high-risk loans for corporate buyouts. Another problem area: nonperforming real estate loans, which rose by 112% in 1989, to $1.3 billion.

To compete abroad more effectively, Citi has spent an estimated $1.3 billion on computers and telecommunications in the past five years. Its advanced communications have enabled the bank to remain the world's top dealer in foreign currencies. The firm also operates the world's largest network of automated teller machines and has introduced such innovations as the touch- tone screen. The bank is currently linking its 2,000 ATMs worldwide, so travelers in, say, Singapore can tap their accounts in New York City or Buenos Aires. With a reach like that, Citicorp will remain a major player on the world banking stage.