CITICORP TRAVELLER MERGER

PRESENTED BY:
SAPTARSHI RAY

FACULTY:
Dr.Tamal dutta chaudhary
• Main businesses were corporate banking &
consumer banking.

• Citicorp corporate banking service was on

20000 corporations in 75 emerging economies &
22 developed economies & generated revenues
of $8 billion in 1997.

• Consumer banking service served 50 mn

customer in 56 countries through 1200 retail
branches & generated revenue of $15 billion
• Main businesses were investment banking, asset
management, life insurance, asset
management ,property casualty insurance, and
consumer lending.

• Major subsidies :
Salomon Smith Barney, Travelers Life and
Annuity, Primerica Financial Services etc.

• in 1997, it was the third largest stock

underwriter in the United States and the
fourth in the world.
MERGER
 MERGER DETAILS

The Citicorp-Travelers Group merger was announced to the

world on April 6,1998.

This merger joined the two companies into a $700 billion

dollar financial giant.

The deal was like a stock swap, with Travelers Group

purchasing the entirety of Citicorp shares for $70 billion, and
issuing 2.5 new Citigroup shares for each Citicorp share.

By joining the two company’s banking, brokerage,

and insurance services , they created the largest financial
firm in history.
 REASON OF MERGER
 Accelerated Growth

 Exchange of Expertise

 Diversification of risk

Source: Competitive advantage via synergy of process &

operation by Dileep Singh & Dr.Geetika
 Travelers service had been standardized in USA.

 They wanted to go global.

 As non-bank providers increased their pressure on
commercial banks, new ways were needed to expand
market share.

 Citicorp wanted to provide more similar kind of

service under one roof.

 The underwriting subsidiary of Traveller, Salomon

Smith Barney had a larger pool of customers.

 Citicorp would be able to create huge

network.
 Effect of merger

Immediate high stock price

Economies of scale

Diversification
 SPILLOVER EFFECT

It put pressure to the law maker to

overturn Glass-Steagall act.

Other banks & insurance companies

began forming strategic alliance.

Revenue growth shoot up for the

financial sector.
Government

On November 15, 1999 President Clinton signed the Gramm-Leach-Biley Act.

This act became law and repealed the Glass-Steagall Act and Bank Holding
Act.

Factor Conditions :
USA needed lot of skilled professional.
The financial sectors started doing new innovation.

Firm Strategy , structure & rivalry :

Lot of this type of merger started happening
because of changing in the regulation.

Chance

Demand conditions :
The demand of the financial product started rising as
the customer can get all financial product under one roof.

Related & supporting industry :

Credit cards are manufactured in Nevada,
printing & mailing are done in Netherlands & data processing is
done in South Dakota .
 Synergies
Citigroup is now able to service an individual consumer
with a number of financial services.

Travelers can now sell their products in the 100

countries.

Citicorp and Travellers are now able to cross-sell to

each other’s customers.

The merger also allows for an effective doubling of the

companies sales force.

Citicorp is now able to provide loans & insurance

facility simultaneously
 Effect on the Global strategy

 Deregulation in financial services allow the

foreign banks to enter in the emerging economy.

 Standardization of the service.

 Uniformity in the back office systems

throughout its branches.
 Possible downfalls

• Diseconomies of Scale

• Conflicts of Interest

• Risk Bounds

• Loss of current Synergies