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					Directed Research


Spring Semester 2009



Preliminary Research on Mergers and Acquisitions with focus on
Citigroup-1998.




Submitted to:

Professor Dr. Wendy Jeffus


Prepared by:

Anuraag Joshi




--04/23/2009—




                                                                 0
                                 Table of Contents
                    TOPIC                            Page Number

Introduction                                              2

History                                                   2

Why Financial Services Merge                              4

Merger Integration Process                                6

Typology of M&A Integration                               8

Alternative Approaches to Merger Integration              9

Integration: Information Technology                      10

Regulatory Influences                                    12

Macro Economic Influences                                13

Empirical Trends                                         14

Key Lessons                                              17

Exhibit 1                                                18

Exhibit 2                                                21

References                                               22




                                                                   1
Introduction:

    This detailed report analyzes the merger and acquisition activities in Banking and Financial
Services industry with focus on Citigroup. Emphasis is laid on the first largest corporate merger
of Citicorp and Travelers. The report explains in detail about Mergers as an event which benefits
both the entities in future growths and profits. The after-effects and the consequences determine
whether the deal was beneficial in entirety. The costs incurred by either company are also
determinants in the value creation. It also talks about the concentric (related) diversification
trend i.e. exploring different segments of the same parent industry, followed by most financial
institutions involved in M&A activities. The merger of Citicorp and Travelers proved to be a
beneficial step towards the futures of both the companies. This allowed the Citigroup to be
named as the largest financial services in the world because of the synergies created by the two
companies. A brief history of Citicorp and Travelers is also provided to analyze the past
followed by the two companies along with the timelines.

    It also describes the various driving forces behind the M&A activities by Citigroup and other
financial institutions, such as the share-holder value creation, domestic competitive pressures,
globalization of the financial markets, homogenization of financial products, with products being
similar at various segments of the markets and also the demands of customers, both retail and
commercial, who want to obtain a full range of financial services from a single institution. The
type of merger and the level of integration adopted by the two companies in focus is also
described in detail.

     The macro-environment forces such as economic scenario during the time of merger, the
political and legal factors, socio-cultural factors, technological influences, anti-trust obligations,
change in leaderships and corporate structure that affect the M&A activities in the financial
market is also explained in detail along with the consideration of real life M&A examples in the
recent past in the analysis. It also includes the recent developments on Citigroup, the purpose and
its consequences for example the recent division of Citigroup into Citicorp-retail and investment
banking and CitiHoldings- brokerage and asset management.

I. History: Citigroup

    The formation of Citigroup in 1998 created a new model of financial services organization to
serve its clients' financial needs. Due to the regulatory forces, commercial and investment
banking activities were separated. Even though the formation of Citigroup violated the
regulatory norms, the deal was finalized and a holding company was formed which opened the
doors to financial services conglomerates offering a mix of commercial banking, investment
banking, insurance underwriting and brokerage. As the company continued to grow and evolve,
it was increasingly evident that such a large, complex grouping of businesses can indeed
succeed. With 275,000 employees working in more than 100 countries and territories, Citigroup's
globalism and diversity contribute to its continued success. 1

    One of the largest financial services firms known to man, Citigroup or ―Citi” has some 200
million customer accounts and does business in 100 countries. Citigroup offers deposits and
1
    Citigroup corporate website: http://www.citigroup.com/citi/corporate/history/index.htm

                                                                                                    2
loans, investment banking, brokerage, wealth management, alternative investments, and other
financial services. The top three competitors of Citigroup are Bank of America, Deutsche Bank
and JP Morgan Chase. 2 Reeling from $90 billion in write-downs and losses on mortgage-related
securities and other investments, Citigroup announced plans in early 2009 to split itself in two-
Citicorp and Citi Holdings. 3 Its history dates back to the founding of Citibank in 1812, Bank
Handlowy in 1870, Smith Barney in 1873, Banamex in 1884 and Salomon Brothers in 1910. The
different segments in which Citigroup operated before the recent split were: Global Consumer
group, Citi Markets & banking, Global Wealth Management, Citi Alternative Investments &
other corporate affairs. 4 Other major brand names in Citigroup's diverse portfolio which are a
part of different segments, before the split included Citi Cards, CitiFinancial, CitiMortgage,
CitiInsurance, Primerica, Diners Club, Citi Private Bank, and CitiCapital.

i. Citicorp:
    Prior to its merger with Travelers Group, Citicorp was the #3 US bank and the world's #1
issuer of credit cards. Bank of America pioneered the industry followed by JP Morgan Chase.
American Express was also a strong competitor for CitiCorp. 5 With some 3,400 locations in 98
countries and territories, Citicorp was the world's only truly global consumer bank, offering
customers worldwide the same set of banking, savings, and financing services. These operations
accounted for half of its sales; the balance came from commercial banking, including corporate
finance and trading. Citicorp was made the holding company of Citibank in 1974. In 1997
Citibank became the first US bank in China to conduct Yuan-based transactions, serving local
corporations and registered foreign enterprises from its offices in Shanghai. 6

ii Citicorp (NYSE:C) and Travelers Merger (NYSE:TRV)
    On April 6, 1998, the merger between Citicorp and Travelers Group 7 was announced to the
world, creating a $140 billion firm with assets of almost $700 billion. The deal would enable
Travelers to market mutual funds and insurance to Citicorp's retail customers while giving the
banking division‘s access to an expanded client base of investors and insurance buyers.
Although presented as a merger, the deal was actually more like a stock swap- which will be
explained in detail later on in the paper, with Travelers Group purchasing the entirety of Citicorp
shares for $70 billion, and issuing 2.5 new Citigroup shares for each Citicorp share. Through this
mechanism, existing shareholders of each company owned about half of the new firm. 8 While the
new company maintained Citicorp's "Citi" brand in its name, it adopted Travelers' distinctive
"red umbrella" as the new corporate logo, which was used until 2007.
The chairmen of both parent companies, John Reed and Sandy Weill respectively, were
announced as co-chairmen and co-CEOs of the new company. The remaining provisions of the
2
    Hoovers Citicorp company factsheet: http://premium.hoovers.com/subscribe/co/boneyard/factsheet.xhtml?ID=ffffrfychfffffffff
3
    Yahoo Finance: http://biz.yahoo.com/ic/58/58365.html
4
  Citigroup 10-k 2007 SEC filings @ Citigroup.com: http://www.citigroup.com/citi/fin/data/k07c.pdf?ieNocache=511
5
  Citigroup 10-k 2007 SEC filings @ Citigroup.com: http://www.citigroup.com/citi/fin/data/k07c.pdf?ieNocache=511
6
  Hoovers Citicorp company factsheet: http://premium.hoovers.com/subscribe/co/boneyard/factsheet.xhtml?ID=ffffrfychfffffffff
7
  Travelers Profile: Travelers Group, at the time of merger, was a diverse group of financial concerns that had been brought
together under CEO Sandy Weill. Its roots came from Commercial Credit, a subsidiary of Control Data Systems that was taken
private by Weill in November 1986 after taking charge of the company earlier that year : ‗Citicorp and Travelers Plan to M erge
in Record $70 Billion Deal : A New No. 1:Financial Giants Unite‘
http://www.iht.com/articles/1998/04/07/citi.t.php
8
  Herald Tribune article dated 7th April 1998: ‗Citicorp and Travelers Plan to M erge in Record $70 Billion Deal : A New No.
1:Financial Giants Unite‘: http://www.iht.com/articles/1998/04/07/citi.t.php

                                                                                                                                  3
Glass-Steagall Act - enacted following the Great Depression - forbade banks to merge with
insurance underwriters, and meant Citigroup had between two and five years to divest any
prohibited assets. 9 The passing of the Gramm- Leach- Bliley Act in November 1999 vindicated
Reed and Weill's views, opening the door to financial services conglomerates offering a mix of
commercial banking, investment banking, insurance underwriting and brokerage. Below is a
basic chart explaining the stock price movements for C & TRV before & after the merger.

Chart 1: Citigroup + Travelers Stock Prices10




Source: Compiled by Anuraag Joshi from Yahoo Finance (Prices are adjusted for stock split)

Event A: Indicates a sharp spike in the stock price of CitiCorp (pre-merger) at the time of the
announcement of the merger.
Event B: Indicates a slight drop in the stock price at completion of the merger.


II. Why Financial Se rvices Merge

    Various environmental developments have made existing institutional configurations
obsolete in terms of financial firms‘ competitiveness, growth prospects and prospective returns
to the shareholders. The regulatory and public policy changes that allow firms broader access to
clients, functional lines of activity or geographic markets and technological scaling are
responsible for triggering corporate actions in the form of M&A deals. Along with the benefits,
the merging firms have to incur huge initial costs to formulate and process the deal. Other than
the price of the M&A, the costs may include re-structuring costs, integration costs and regulatory
fees. Below is the breakdown of some of the factors influencing an M&A transaction.
    i.   Cross Selling/Synergy: Cross-selling is defined by as the action or practice of selling
         among or between established clients, markets, traders or that of selling an additional

9
  Investopedia Article: ‗What Was The Glass-Steagall Act?’
http://www.investopedia.com/articles/03/071603.asp
10
   Source: Compiled by Anuraag Joshi from Yahoo Finance:
http://finance.yahoo.com/q/hp?s=C&a=02&b=24&c=1998&d=09&e=31&f=1998&g=d

                                                                                                4
           product or service to an existing customer. The merger of Citicorp and Travelers to form
           Citigroup was largely revenue driven to take maximum advantage of the two firms‘
           strengths in products and distribution channels dispersed in different geographies. 11 After
           the merger Citigroup was able to provide a package of financial services instead of the
           individually characterized service. For example Citicorp with a number of new mortgage
           orientations every year was able to bundle travelers insurance in a package for customers.
           Citicorp's private banking also offered clients such services as trust and estate planning,
           which Travelers did not have. Cross selling alone enabled Citigroup to generate over the
           next two years an additional $600 million in earnings. 12 The arrangement solved
           Citicorp's and Travelers' biggest problems. Citicorp could get a stronger U.S. direct-sales
           force to market Citi checking accounts, mutual funds, and credit cards. In addition, while
           Citi had private bankers catering to the very wealthy, Travelers has 10,300 Salomon
           Smith Barney brokers, 80,000 part-time Primerica Financial Services insurance agents,
           and 100,000 agents that sold Travelers insurance. 13
     ii.   Economies of scale: In an information-intensive industry with high fixed costs such as
           the financial services, there is a huge potential for scale economies. This refers to the fact
           that the combined company can often reduce duplicate departments or operations,
           lowering the costs of the company relative to theoretically the same revenue stream, thus
           increasing profit. Benefits from the economies of scale can be realized in the company‘s
           information flow. If a company has a larger customer base, the cost per customer base
           can be reduced with economies of scale facilitating cross selling. In the banking sector of
           the financial industry, there is a strong need to manage huge databases containing
           information on demographics, transaction history etc. The software based costs are huge.
           The global information technology spending by financial services institutions will reach
           $353.3 billion in 2009, representing a decline of 1.3% over 2008, when the research fir m
           recorded IT spending at $358 billion. This figure is substantially lower than the 4.5%
           growth achieved in 2008 and 6.4% growth in 2007. 14 Hence, a larger database would
           offset these costs as the marginal cost of adding a new customer is negligible. 15 Hence,
           cost can be distributed over a larger customer base. This also avoids costs related to
           duplication of information.
 iii.      Revenue economies of scope: This refers to the savings in the overall cost to the buyer
           of multiple financial services from a single supplier as compared to that from separate
           suppliers. The costs may include the transaction costs, monitoring costs and costs
           associated with separate contracts. Secondly, if the buyer receives service through the
           same supplier he might be willing to pay for the service at a premium.


11
   M ergers & Acquisitions in Banking & Finance by Ingo Walter- Chp. ‗Why financial services merge‘ pg # 72
12
   Business Week article dated April 9 1998: The 'Coca-Cola of Personal Finance‘
http://www.businessweek.com/1998/16/b3574073.htm
13
   Business Week article dated April 9 1998: The 'Coca-Cola of Personal Finance‘
http://www.businessweek.com/1998/16/b3574073.htm
14
   A report by Celent on bankingtechnology.com: ‗IT spend to fall in 2009‘
http://www.bankingtech.com/bankingtech/article.do?articleid=20000136362
15
   Federal Reserve Bank of Richmond Publications in Summer 1998: ‗Banks M erge To Stay Competitive‘
http://www.bowne.com/securitiesconnect/details.asp?storyID=1256

                                                                                                              5
     iv.   Diversification: Greater diversification of income can be achieved from multiple
           products, client groups and geographies. Combining the two institutions will make them
           less dependent on volatile earnings streams. For e.g. earnings of a firm under Travelers
           umbrella as a percentage of travelers overall earnings would fall as the earnings would
           now be a percentage of the larger Citigroup. This smoothens the earnings result of a
           company, which over the long term smoothens the stock price of a company, giving
           conservative investors more confidence in investing in the company
     v.    Explore/Dominate ne w markets: In addition to operating economies and revenue
           synergies, financial firms will also seek to dominate markets. The two merging firms ma y
           take advantage of the monopolistic and the oligopolistic returns. It gives them an
           opportunity to grow and explore new markets and market segments. This may also give
           rise to the possibility of an anti- trust action to prevent exploitation of the monopoly
           positions in the financial sectors. Post merger Citigroup became the world‘s largest
           financial institution. The deal between Citicorp and Travelers gave Travelers instant
           access to Citi‘s 750 offices outside USA and made it an international financial service
           provider. 16
     vi.   Regulatory s upport: The failure of any major financial institution could cause
           unacceptable systematic consequences. Hence, there is high possibility of that firm being
           bailed out directly by the governing body and indirectly by the tax-payers. In US, this
           policy came into limelight during early 1980s. In the present scenario this action is
           driving the global economy. In October 2008, the US govt. announced Emergency
           Economic Stabilization Act of 2008, commonly referred to as the bailout of the U.S.
           financial system. It was a law enacted in response to the global financial crisis of 2008
           authorizing the United States Secretary of the Treasury to spend up to US$700 billion to
           purchase distressed assets, especially mortgage-backed securities, and make capital
           injections into banks. 17 In the political environment and any market crisis these plans help
           to create a public sector safety to limit damage to the shareholders of damaged banks or
           any financial firm.
vii.       Sustain market pressures: Most financial services merge to avoid market pressures to
           lose its active status in the industry. The financial industry is consolidating at an
           accelerating speed. Merrill Lynch merged with Bank of America primarily to strengthen
           its survival possibilities in the industry. 18

III. Merger Integration Process:

    The traditional approach of applying the post merger integration phase after the deal may
lead to frictions and delays in the results foreseen in the pre-merger phase. This also might
diminish the benefits of the transaction. Applying the integration process at an early stage can
yield disciplined results. Following the announcement of the merger in the month of April, all
Citicorp and Travelers Group divisions merged to form Citigroup on 8 th October.19 Therefore, it

16
   Business Week article dated April 9 1998: The 'Coca-Cola of Personal Finance‘
http://www.businessweek.com/1998/16/b3574073.htm
17
   Guardian-UK article dated 13 the Nov. 2008: ‗Paulson abandons plans to buy up America's toxic mort gage assets‘
http://www.guardian.co.uk/business/2008/nov/13/harry -paulson-banking-rescue-mortgage
18
   Washington Post article dated Sep. 15 2008: ‗ Weekend M erger Struck With Bank of America‘
http://www.washingtonpost.com/wp -dyn/content/article/2008/09/14/AR2008091401468_2.html?sid= ST2008091402574&s_pos=
19
   Citigroup Inc. history on the corporate website: http://www.citigroup.com/citi/corporate/history/citigroup.htm

                                                                                                                 6
took six months for Citigroup to be formed and all its segments to be integrated in a new holding
company. Similar integration of Barclays-Lehman Brothers was complete in 90 days and the
recent Bank of America- Merrill Lynch integration was slated to be complete within 60 days.

      i.    Type of Merger:
Multifunctional financial firms‘ merger and acquisitions may take a number of distinct forms
listed below:20
Type A: In this type of merger, the companies would transform into a fully integrated financial
firm under a single corporate structure, supported by a single capital base. This firm would
provide services in banking, asset management, securities and insurance.
Type B: In this type of merger, the merging entities would transform into a partially integrated
company which conducts commercial and investment banking within the same entity but
undertakes insurance underwriting and distribution, mortgage banking and other specialized
services through separately capitalized subsidiaries.
Type C: In this type of merger, a commercial bank forms the parent of subsidiaries engaged in a
variety of other financial services ranging from investment banking to insurance.
Type D: This involves creation of a holding company which controls affiliates engaged in
commercial banking, investment banking, insurance and other types of financial and non-
financial businesses.

The chart below describes a typical Type D Merger: The merger of Citicorp and Travelers was a
Type D merger where a new holding company; Citigroup was formed controlling different
affiliated segments. 21
Chart 2: Basic Citigroup or Type D Merger:

                                             Holding Company: Citigroup


Banking Activities: Citibank                Securities Activities: CitiMortgage              Insurance Activities: Travelers

Source: Compiled by Anuraag Joshi. Format based on Ingo Walter-Mergers and Acquisitions in
Banking and Finance. Chapter 4, figure 4-1 on page 101.
     ii.    Drivers of a Merger:

Regulatory Issues: This would include terms of merger, covenants and agreements, legal matter,
tax consequences, accounting treatment, etc.
Characteristics of services involved: The merger structure strongly focuses on the product mix
offered by the two companies. Citicorp was one of the largest financial institutions and Travelers
was one of the largest insurance underwriter and distributor.
Demand side issues: This would relate to the market structure and client preferences. Formation
of Citigroup would give customers a one stop shopping for all the financial and non- financial
services as the Co-CEOs of the Company; Sandy Weill of Travelers and John Reed of Citicorp
labeled Citigroup as the ‗Financial Supermarket‘. But, selling of Travelers; ins urance

20
     Ingo Walter- M ergers and Acquisitions in Banking & Finance: ‗M anaging Financial Services M &A‘.
21
     Please Refer Appendix for Citigroup Structure.

                                                                                                                         7
underwriting business in 2002 and selling half of Smith Barney brokerage into Morgan Stanley
proved the label unsuccessful on long term basis. 22
Other Benefits: According to Philip K. Smith - a consultant, the creative and informed use of a
bank holding company can help achieve many of the goals of an institution. Some are explained
below: 23

    a) Capital and Financing:
     Flexibility: The flexibility of the holding company provides much more efficient
       financing and use of capital. Such flexibility allows a holding company to raise capital
       and achieve financial flexibility less expensively and easier than an institution alone. For
       example Bank Holding Companies may borrow money with the debt treated as a liability
       at the holding company level; however, the funds can be "pushed down" to the bank as
       new equity capital for the bank.
     Alternative equity forms: Since a holding company is simply a state chartered
       corporation, it can utilize virtually any type of equity structure. For example, it can use
       preferred stock as well as common stock. It can also use preferred stock with an
       adjustable rate dividend, or preferred stock convertible into common stock
     Hybrid Debt/Equity Securities: In addition, a bank holding company can issue trust
       preferred securities which the Federal Reserve considers to be equity at the bank holding
       company, yet the Internal Revenue Service (IRS) treats it as debt. 24
IV. Typology of M&A integration:

    The three strands to the conceptual basis for integration post M&A deals that seem to apply
to the financial service sector and bear problems of integration are:

        Strategic fit: M&A transactions in concentric markets that can possibly demonstrate a
         strategic fit should perform better than the un-related situations due to possible benefits
         of economies of scale, economies of scope, market reach and market dominance.
         Citicorp‘s dominance in the commercial banking industry and Travelers excellence in the
         insurance underwriting and distribution was seen as one of the ideal strategic alliances.
        Organizational fit: In many cases, poor post M&A transactions are linked to the
         organizational problems encountered during the integration process. This negatively
         impacts the post acquisition process. Having two persons as co CEOs for Citigroup
         proved unfavorable for the organization as the differences amongst the leaders of the
         company offset the organizational synergy. John Reed was a visionary, committed to
         long term thinking and invested on projects that could realize his vision. On the other
         hand, Sandy Weill was an aggressive person famous for his intuitive thinking and

22
   Article dated Jan 12 2009: One Stop Shopping Calamity: http://www.portfolio.com/news-markets/top-5/2009/01/12/Financial-
Supermarkets
23
   Presentation by Philip K. Smith- Philip k. Smith Gerrish M cCreary Smith, Consultants And Attorneys M emphis, Tennessee at
the Annual Directors Conference at San Diego, California on November 3 - 5, 2005:
http://www.wib.org/conferences__education/past_programs/2005_directors_conference/presentations/smith_handout_dir05.pdf
24
   Presentation by Philip K. Smith- Philip k. Smith Gerrish M cCreary Smith, Consultants And Attorneys M emphis, Tennessee at
the Annual Directors Conference at San Diego, California on November 3 - 5, 2005:
http://www.wib.org/conferences__education/past_programs/2005_directors_conference/presentations/smith_handout_dir05.pdf



                                                                                                                            8
         reckless agreements on M&A transactions. A year after the integration shareholders that
         formed an integral part of the wealth maximization model of Citigroup felt the friction
         between the two CEOs which led to the removal of John Reed as the co CEO in 2000. 25
        Knowledge-based view: This considers the human resources dominate the material
         resources of the firm. There is a strong link between the knowledge of employees and the
         benefits to be extracted from the available material and financial resources. The
         uniqueness of employee knowledge is identified as the source of sustainable competitive
         advantage. Citigroup benefited from the sales work force of Travelers insurance as they
         were further trained and inducted into Citibank‘s credit cards division. 26 But at the same
         time in September 1998, Citigroup announcing restructuring plans laying off a substantial
         amount of work- force put questions marks on its pre- merger claimed synergy. 27

V. Alternative Approaches to Merger Integration:

Three merger-integration approaches have been identified:
    Absorption approach: This usually applies to M&A transactions within the same
       financial services sector in which one of the main justifications is the realizat ion of
       economies of scale or operating efficiencies that can apply to overlapping operations.
    Symbiotic Approach: This generally applies to cross-sector transactions for example
       between commercial and investment banking or commercial banking and insurance. In
       this, the cultural differences can be fairly wide and therefore may take time to bridge.
       This approach has also been used in market strengthening situations.
    Preservation approach: This involves justification for a merger or acquisition
       leveraging knowledge about the new business or industry area and its competencies.

    In this case, Citigroup adopted a combination of the Symbiotic approach and the Absorption
approach. Symbiotic approach was because of the fact that it was a cross-sector transaction or a
commercial banking and insurance transaction. Since, Citicorp to was a holding company of
various commercial and specialized financial and non- financial services, it had many
overlapping operation with Travelers and hence could make us of the absorption approach. Also,
based on the firm requirements a chart can be drawn to prioritize the approaches.




Chart 4: Types of Integration Approaches:
                              Need for Strategic Independence
                                       L                                      H
25
   An article on Business Week dated: June 7, 1999 ‗Citigroup: Is This M arriage Working?‘:
http://www.businessweek.com/1999/99_23/b3632001.htm
26
   Business Week article dated April 9 1998: The 'Coca-Cola of Personal Finance‘
http://www.businessweek.com/1998/16/b3574073.htm
27
   News Article on New York Times dated September 18, 1998
http://query.nytimes.com/gst/fullpage.html?res=9E01E7DD1730F93BA2575AC0A96E958260&sec=&spon=&pagewanted=all



                                                                                                              9
Need             H       Preservation                                  Symbiotic
for

Organizati-                                                                       Citigroup
onal

Autonomy
                 L       Holding                                       Absorption



Source: Compiled by Anuraag Joshi. Format based on Ingo Walter-Mergers and Acquisitions in
Banking and Finance. Chapter 4, figure 4-3 on pg 107

VI. Integration: Information Technology:

    Information Technology (IT) systems form the core of today‘s financial institutions and
underpin their ability to compete in a rapidly changing environment. Technological innovation
affects not just banking, financial services, and regulatory policy, but also the direction of the
economy and its capacity for continued growth. Many banks are making what seem like huge
investments in technology to maintain and upgrade their infrastructure, in order not only to
provide new electronic information-based services, but also to manage their risk positions and
pricing. 28 At the same time, new off-the-shelf electronic services, such as on- line retail banking,
are making it possible for very small institutions to take advantage of new technologies at quite
reasonable costs. These developments may ultimately change the competitive landscape in
financial services in ways that we cannot predict today. Consequently, IT integration has become
a focal point of the mergers and acquisitions process in the financial services sector. It is often a
key source of synergies that can add to the credibility of an M&A transaction. Chart below
estimates the global spending by financial services on information systems in 2006 through
2010.




Chart 5: Global IT s pending by Financial Services (2006-E {2010}) 29



28
   Remarks by Roger W Ferguson, Jr, Vice-Chairman of the Board of Governors of the US Federal Reserve System, at the
Financial Services Conference 2000, St. Louis University, St. Louis, M issouri: 20 October
2000.http://www.bis.org/review/r001023a.pdf
29
   Celent research report dated January 9,2009: http://www.celent.com/PressReleases/20090109/GlobalITSpending.asp

                                                                                                                       10
Source: Celent research library

    As one can see from the chart, the global IT spending by Financial Services would reach
$353 billion by the end of 2009 and increase by 3.11% in 2010 to $364 billion. 30 Historically,
bank mergers can result in significant IT cost savings, with the potential of contributing more
than 25% of the synergies in a financial industry merger. 31 This suggests that finding the right IT
integration strategy is one of the more complex subjects in a financial industry merger. The
retention of an IT system or implementation of a new system is one of the most important
decisions the merging firms make. Such IT based struggles have been estimated to consume 40%
of more staff resources than in the case of straightforward harmonization of IT platforms. 32 The
time factor also plays an important role in IT integration. Slow IT integration has the obvious
potential to delay in many of the other non-IT integration processes and eventually delay the
overall integration process.

     i.   Influence of IT integration on Citigroup:
    The Information Systems that managed many arms and legs of the company had never been
properly or sufficiently integrated. Citigroup CEO Vikram Pandit himself admitted that each of
the businesses was operating with its own back office. He told investors and analysts last May
that Citigroup had a huge number of over 140,000 people in IT and operations, 16 database
standards and 25,000 developers. This resulted not only in waste but disallowed any opportunity
to leverage the organization. 33 The recent split of Citigroup into two-CitiCorp and CitiHoldings
might just offset years of IT integration work, conducted by Citigroup following the merger of
Citicorp and Travelers Group in 1998. It took Citigroup almost 10 years to be slightly efficient in
their IT systems. This split would force Citigroup to incur huge costs to standardize their IT

30
   Celent research report dated January 9,2009: http://www.celent.com/PressReleases/20090109/GlobalITSpending.asp
31
   ‗The Special problem of IT integration‘, Mergers and Acquisitions in Banking and Finance by Ingo Walter.
32
   ‗The Special problem of IT integration‘, Mergers and Acquisitions in Banking and Finance by Ingo Walter
33
   Article dated 1-21-09 by Dan Briody at CIO Insight: http://www.cioinsight.com/c/a/IT -M anagement/Could-IT-Have-Saved-
Citigroup/

                                                                                                                            11
platform as they split their businesses. The massive 52,000 layoffs in the IT department of
Citigroup, shows the huge costs associated with IT human staff and its vulnerability to the
economic slowdowns. 34

     ii.   IT integration and Alignment issue:
    Information Technology can be either a stumbling rock or an important success factor in a
bank merger. The time delays can be reduced or eliminated and cost savings can be achieved if
the pre- merger IT setup is efficiently aligned. The extent to which the IT systems of the target be
integrated into the acquirer‘s existing infrastructure is the first step in initializing the alignment
process. This process primarily depends on the merger goals for example cost reductions or new
revenue streams. Pre- merger, CitiCorp was one of standardized institutions in terms of IT with
highly advanced preferences and over $2 billion IT spending where as Travelers was not so IT
efficient. 35 Once the degree of alignment between business strategy and IT strategy has been
assessed, the fact whether existing IT infrastructure can support a potential IT merger integration
becomes apparent. The degree of integration also depends upon, the integration process adopted
by the merging entities such as the horizontal, vertical integration, diversification or
consolidation. Cost-driven M&A deals usually lead to a full, in-depth integration. In this case,
integration adopted by Citigroup was Vertical integration or product driven integration where the
primary objective is to add new products to the existing production chain or line. 36

VII. Regulatory Influences:

     i. The Glass-Steagall Act of 1933:
     Following the Great Crash of 1929, one of every five banks in the United States of America
failed. Many saw market speculation engaged in by banks during the 1920s as a cause of the
crash37 . In 1933, Senator Carter Glass and Congressman Henry Steagall introduced the historic
legislation called The Glass-Steagall Act of 1933 seeking to limit the conflicts of interest created
when commercial banks underwrote stocks or bonds. In the early part of the century, individual
investors were seriously hurt by banks whose overriding interest was promoting stocks of
interest and benefit to the banks, rather than to individual investors. The new law banned
commercial banks from underwriting securities, forcing banks to choose between being a simple
lender or an underwriter (brokerage). The act also established the Federal Deposit Insurance
Corporation (FDIC), insuring bank deposits, and strengthened the Federal Reserve's control over
credit. In 1956, the Bank Holding Company Act was passed that extended restrictions on banks,




34
   Citigroup split up will send IT in 'reverse' – 01/20/2009- Computerworld.com:
http://www.computerworld.com.au/article/273458/citigroup_split_up_will_send_it_reverse
35
   Clash of technologies in merger: Citicorp and Travelers' computers not on speaking terms:
http://www.faqs.org/abstracts/Business-general/Clash-of-technologies-in-merger-Citicorp-and-Travelers-computers-not-on-
speaking-terms.html
36
   ‗The Special problem of IT integration‘, Mergers and Acquisitions in Banking and Finance by Ingo Walter
37
   ‘The Long Demise of Glass-Steagall’: http://www.pbs.org/wgbh/pages/frontline/shows/wallstreet/weill/demise.html



                                                                                                                          12
including that bank holding companies owning two or more banks cannot engage in non-banking
activity and cannot buy banks in another state. Since, the act was put into force, many efforts
were made to loosen some restrictions on financial institutions and in January 1989 the Federal
Board authorized an J.P. Morgan, Chase Manhattan, Bankers Trust, and Citicorp to expand the
Glass-Steagall loophole to include dealing in debt and equity securities in addition to municipal
securities and commercial paper. This marked a large expansion of the activities in the banking
and financial industry. Consequently in 1990, J.P. Morgan became the first bank to receive
permission from the Federal Reserve to underwrite securities, so long as its underwriting
business did not exceed the 10 percent limit.

   ii. The Gramm-Leach-Bliley Act
   Following the merger announcement Citicorp and Travelers on April 6, 1998, the US Federal
Board under tremendous pressure to modernize financial services legislation, after 12 attempts in
25 years on November 12 1999, finally repealed The Glass-Steagall of 1933 and The Gramm-
Leach-Bliley Act, also known as the Gramm-Leach-Bliley Financial Services Modernization Act
was enacted that opened up competition among banks, securities companies and insurance
companies. 38

VIII. Macro-Economic Influences:

    Macro-economic factors such as economic slowdowns have major effects on the
performance of a financial institution which in turn affects the performance of any firm in the
process of a merger and acquisition. The chart below displays performance of the leading
financial institutions in the US and in the world in terms of their market capitalization.
Chart 6: Market capitalization comparison of leading financial institutions between the year
2007 and 2009.




Source: Compiled by Anuraag Joshi based on the format provided by Prof. Wendy Jeffus and
information provided by Yahoo Finance.
The above chart shows the drastic changes in the market capitalization of leading financial
institutions from the year 2007 through 2009(current). The massive differences are primarily
observed due to the ongoing global financial crisis which initiated in the mid of 2007. The


38
     ‘The Long Demise of Glass-Steagall’: http://www.pbs.org/wgbh/pages/frontline/shows/wallstreet/weill/demise.html

                                                                                                                       13
fluctuations in the total dollar market value of the above company‘s outstanding shares prove its
volatility to systematic risks i.e. market risks and in return its volatility to economic slowdowns.

IX. Empirical Trends:

    Mergers and Acquisitions that work tend to focus the activities of the acquiring firm either
geographically, or by product or by clients which in turn allows the realization of operating
efficiencies and maximizes the firm‘s market footprint. Constancy has long been the hallmark of
the banking industry, but the ability to adapt may be a bank's greatest asset. A study by Bank for
International Settlements concluded that majority of mergers and acquisitions have had
disappointing returns. The primary reason the study suggested was the underestimation of
organizational problems and tendency to overpay for targets. Industry leaders such as JP Morgan
Chase & Co., Citigroup have attained the positions through mega- merger deals.
    i.   Citigroup (NYSE: C):
   Citigroup‘s M&A history has been the most fascinating. The illustration below explains the
developments in the formation of Citigroup from 1987 through 1998.
Chart 7: Formation of Citigroup through mergers and acquisition from 1987 through 1998.




                CitiCorp.                              Travelers Inc.                  Smith Barney
.   Citigroup               Shearson Lehman Brothers Inc.
                                                              Travelers Corp               Primerica
Source: Compiled By Anuraag Joshi based on the information on pg. 158 of mergers and
Acquisitions in Banking and Finance by Ingo Walter.
    Primerica which itself was an amalgam of several predecessor firms acquired Smith Barney
in 1987 and acquired Travelers Corp in 1992-93. It then acquired Smith Barney in 1987 and
Travelers Corp. in 1992-93 to form Travelers Inc. As Travelers Inc. it acquired Shearson




                                                                                                   14
Lehman Brothers Inc. in 1996, Salomon in 1997. It then acquired CitiCorp in 1998 to form a new
holding company Citigroup. 39
     ii. JP Morgan (NYSE:JPM) and Chase (NYSE:CMB):
    JP Morgan Chase and Co. is one of the oldest financial services firms in the world. It is one
of the top leaders in financial services with assets of $2.3 trillion. and the largest market
capitalization and deposit base of any U.S. banking institution. 40 It was formed in 2000 when
Chase Manhattan Corporation acquired J.P. Morgan & Co. The formation of JP Morgan Chase &
Co. was also a result of a number of different mergers and acquisitions.
Chart 8: Formation of JP Morgan Chase & Co.

                                              JP Morgan Chase & Co.



     JP Morgan Chase                 Bear Stearns                     Bank One                    Washington Mutual


JP Morgan Chase Manhattan Bank Banc One Corp First Chicago
                                                                            Commerce Corp
Chase Manhattan Bank               Chemical Bank
                                                     Washington Mutual Providian                  Great Western Bank
           Chemical Bank             Manufacturers Hanover
Source: Compiled by Anuraag Joshi based on the information and format from JP Morgan
Chase & Co. at Wikipedia.com 41
    The above two illustrations show the influence of extensive mergers and acquisitions in the
banking and financial services industry. Mergers and acquisitions has been the key to pioneer the
industry and also survive industry pressures. JP Morgan(JPM) and Chase (CMB) merged to form
JP Morgan Chase with an aim to create an organization with unparallel client base, global
capabilities and product leadership in growth markets. 42 Both CMB and JPM had been struggling
to establish themselves in the securities underwriting and M&A advisory businesses. Amidst
takeover speculation of the possible merger of Chase and JP Morgan, stock market reacted and
JP Morgan showed a 60% increase in its stock price over the period of three months. 43 The
merger was an all-stock offer by Chase of 3.7 shares of the new firm for each share of JPM. The
deal was closed at $30.9 billion. Below is the chart that shows the stock price movements of JPM
throughout the year 2000. 44


39
   What is the evidence pg. 158-M ergers and Acquisitions in Banking and Finance by Ingo Walter
40
   Introduction to Washington M utual at Chase.com: https://www.chase.com/welcomewamu/
41
   JP M organ Chase & Co. at Wikipedia: http://en.wikipedia.org/wiki/JPM organ_Chase
42
   What is the evidence pg. 171-M ergers and Acquisitions in Banking and Finance by Ingo Walter
43
   Ibid
44
   Ibid

                                                                                                                   15
Chart 9: Stock price movements of JP Morgan & Chase (NYSE: JPM) over 2000 (Stock Price is
adjusted to stock swaps and dividends).




Source: Compiled by Anuraag Joshi based on the data from Yahoo Finance 45
Event A shows the spike in the stock price of JPM when the rumors of a possible merger started.
Over the period of three months the stock price increased by 60% and started the downward
trend in September 2000 when the merger was announced shown by Event B.

       iii. Cross Border Acquisition: Barclays (NYSE: BCS) and Lehman Brothers (LEH)
    Barclays bank acquired Lehman Brothers Inc. soon after it filed for bankruptcy in the midst
of the financial crisis in September 2008. Chart below shows the share price movements of both
Barclays and Lehman Brothers before, during, and after the deal.
Chart 10: Share price movements of both Barclays and Lehman Brothers Inc. pre/post
acquisitions




Source: Compiled by Anuraag Joshi based on the information from Yahoo Finance. 46
Event A indicates a sharp share price fall due to a short-period halt in trading of Lehman‘s shares
commenced by DBS.47 Event B displays a dip in Lehman‘s share price when it declared

45
     Yahoo Finance: www.finance.yahoo.com
46
     Ibid

47
  Barr, Colin, CNN.com, ―Update: Lehman Brothers faces a storm‖ M arch 17, 2008,
http://dailybriefing.blogs.fortune.cnn.com/2008/03/17/lehman-brothers-faces-a-storm/.

                                                                                                16
bankruptcy. Shortly thereafter, Barclays agreed to buy Lehman, but the impact on the latter‘s
share price was negligible as seen in Event C.
Key Lessons:
     Fundamentally, throughout this report, key drivers to success of bank mergers and
integrations are experienced and determined synergies, significant net cost savings, swift
decision- making and the cost of IT integration. In the case of Citigroup, the merger of CitiCorp
and Travelers aimed at creating a Financial Supermarket in the US financial industry. Integration
had to play an important in the merger, and recent diversifications by Citigroup in to CitHoldings
and CitiCorp could just offset possibility of achieving economies of scale. On IT integration,
Citigroup accomplished this objective through the execution of its strategic IT execution by
combining the not so technologically advanced Travelers with highly advanced technology of
CitiCorp to attain cost savings and reduce redundancies. Regarding the swiftness of the decision
making during the integration phase, Citigroup completed its merger scheme within six months
as it involved a complex procedure of forming a new holding company.

    Taken all the above key drivers to merger success into account, Citigroup seemed to do well
in terms of strategies and implementation. However, macro-environmental factors tend to
hamper the success of mega-mergers like that of the CitiCorp and Travelers. Fluctuations in the
economic conditions, has empirically proven to have shortened the lifetime of proposed
synergies.

    In mergers and acquisitions the systematic and unsystematic implications are important
determinants. The merging entities should be able diversify the unsystematic implications i.e.
company-related as the systematic implications or risks i.e. market related implications are not
diversifiable. The mergers and acquisitions are bound to provide success but numerous instances
of unfavorable business cycles and other adverse circumstances could make it economically less
efficient. Hence, the merits of merger in the banking and financial industry may appear at a
slower rate due to fluctuations in the global economy.




                                                                                               17
Appendix

Exhibit 1: Citigroup- Significant Events- Timeline
1998
       October 8: All Citicorp and Travelers Group divisions merge to become Citigroup Inc.
1999
       Citibank launched CitiDirect Online Banking, the first multi-product, multi- geographic
        Internet banking system. They also began operations in Tokyo Japan as a joint venture
        between Salomon Smith Barney & Japan's Nikko Securities Co., Ltd. All U.S. and
        Canadian branches of Commercial Cred it were rebranded as CitiFinancial. Also one of
        the major events happened in that year was the appointment of retired U.S. Treasury
        Secretary Robert E. Rubin as the Chairman.
2000
       Citibank Mexico increases its stake to 91% in Afore Garante, Mexican pension-fund
        manager. It qualified to be as a financial holding company and was amongst the first to
        take advantage of the new Gramm- Leach-Bliley Act, the Financial Services
        Modernization Act.
       The tender offer for all Class A shares of Travelers Property Casualty Corp. was
        completed and Citibank Mortgage became CitiMortgage, Inc. and was branded as
        CitiMortgage. In the same year Citibank became the first international bank to open a
        full-service branch in Israel.
       Citigroup acquired Associates First Capital Corporation, the fifth- largest consumer
        finance company in Japan. Associates' North American consumer finance operations was
        incorporated into CitiFinancial; its commercial unit into Global Equipment Finance; and
        its credit-card operations into Citibank's card operations.
2001
       Citigroup's $13 billion of earnings in 2000 made it one of the world's most-profitable
        companies.
       CitiInsurance, the international arm of Travelers Insurance, was formed.
       Women and Company, a new Citigroup business that responds to the growing
        community of successful women who need access to trad itional financial services, is
        introduced in the U.S.
       Citigroup purchases Mexico's "Banacci" (Grupo Financiero Banamex-Accival), renames
        it Grupo Financiero Banamex and integrates operations in Mexico under the Banamex
        brand name. It is the largest foreign acquisition in Mexico and largest financial sector
        deal ever in Latin America.
2002
       Citigroup acquired Golden State Bancorp, parent company of First Nationwide Mortgage
        and Cal Fed. This enabled Citibank to expand its retail distribution franchise in key
        California and Nevada markets and add approximately 1.5 million new customers. It
        became Citibank (West).
2003
       Citigroup rebrands its corporate and investment banking business to Citigroup. The
        global private client division is rebranded Smith Barney.



                                                                                             18
      Citigroup Global Markets began trading in China's $500 billion Yuan-denominated A
       share and debt markets. Citigroup was one of only two foreign companies allowed to
       trade A shares in the previously closed markets.
      They also announced to acquire the majority of Diners Club Europe from GTP Holding
       SpA, bringing Citigroup's stake to 100%. Diners franchises in the U.K., Ireland, Belgium,
       Luxembourg, the Netherlands, Italy, France, Germany and Switzerland were also part of
       the deal..
      The Citibank (New York State) legal entity merges with Citibank, N.A. legal entity..
      Charles O. (“Chuck”) Prince replaced Sanford I. Weill as Chief Executive Officer of
       Citigroup, and Robert B. Willumstad, President, also became Chief Operating Officer.
      CitiMortgage and Fannie Mae announced a $100 billion affordable- lending alliance,
       which was the largest such alliance in Fannie Mae's history.
      For the first time, the Federal Reserve approves commodities trading by a bank, allowing
       Citigroup to retain control of Phibro, Inc., which it acquired in 1998 as part of the
       Citicorp- Travelers merger.
      Citibank purchased a 4.62% stake in Shanghai Pudong Developme nt Bank Co. Ltd. As
       Shanghai Pudong's fourth- largest shareholder, Citibank along with China's ninth- largest
       bank entered the country's emerging credit-card market.
      Citigroup acquired Sears Credit and Financial Products' credit-card business and entered
       a multi-year marketing and servicing alliance with Sears. The $31.8 billion purchase
       included Sears' private- label credit-card receivables and increased Citigroup's portfolio to
       161 million accounts and $146 billion card receivables in North America, and 176
       million accounts and $160 billion card receivables globally.
      Citigroup acquired Forum Financial Group headquartered in Portland, Maine, and with
       operations in the U.S., Poland and Bermuda. It was a leading service provider to the
       global mutual fund, hedge fund and offshore fund industries.
2004
      They also acquired KorAm Bank, founded in 1988, and was one of South Korea's largest
       commercial banks, with 223 branches.
      The group‘s 20% investment in the Saudi-American Bank was sold. Finalized a deal with
       the First American Bank of Texas, with its 100 branches.
      Washington Mutual Finance Corporation, which provided direct real estate-secured loans
       and consumer installment loans to consumers through 427 offices in 26 states, was
       acquired for $1.25 billion from its parent company, Washington Mutual, Inc., and joined
       CitiFinancial.
      The Financial Services Agency of Japan forced Citigroup to shut down its Japanese
       private banking operations within a year and for its trust banking unit to halt all new
       operations. The regulators also ordered Cititrust in Japan to shut down in October 2004.
       Internal controls, governance, and compliance issues underlay these actions. CEO Prince
       visited Japan and personally apologized for the failures of these Citigroup businesses.-
       Legal
2005
      Formally acquired First American Bank in Texas. At the same time sold Travelers Life
       and Annuity.
      They launched the C itigroup Microfinance Group to work with leading microfinance
       institutions, microfinance networks, and investors as commercial partners and clients.

                                                                                                 19
       Also, issued the first dual-currency card in China. CitiFinancial introduced a real estate-
       secured loan product in markets such as Hong Kong and Poland, where such loans had
       been unavailable.
2006
      Launched Citibank Direct, an e-banking business, which garnered $12 billion in deposits
       in its first year.
      Collaborated with 7-Eleven to add 5,500 ATMs throughout the United States also 1,200
       new retail and consumer finance branches opened globally.
      Corporate and Investment Banking offices opened in Kuwait and Dubai.
      American Airlines and Citi completed the 25th year of the American Airlines
       AAdvantage Card product, the world's first travel awards program.
      Citigroup, which had been one of four international banks behind the creation of the
       Equator Principles, now the industry standard, also participated in their updating.
      New branches in Boston and Philadelphia housed both Citibank and Smith Barney
       businesses; CitiFinancial branches also began to offer Citibank products.
      Launched biometric tools: the world's biometric credit card service (in Singapore) and its
       first biometric ATMs (in India).
      Acquired 20% stakes in Akbank in Turkey and Guangdong Development Bank in China.
      Citibank received a Moody's rating of Aaa, a rating that few other financial institutions
       could have.
      In a landmark deal--one of the world's largest microcredit financings--the Citi
       Microfinance Group, Citi in Bangladesh, and other partners, closed on the world first
       AAA-rated local currency microcredit securitization for BRAC—the world's largest
       national antipoverty, nongovernmental organization serving more than 5 million people,
       mostly women, in Bangladesh.
      Weil ended his tenure as Chairman
      That year Citigroup expanded its fund services operations via its 2007 acquisition of
       BISYS. As part of the deal, the company sold BISYS' insurance services division to
       investment firm J.C. Flowers & Co.


2007
      In 2007 it picked up remnants of the subprime mortgage collapse when it acquired ACC
       Capital Holding's wholesale mortgage origination operations as well as the servicing
       rights to some $5 billion in home loans. It also bought ABN AMRO Mortgage Group in
       2007.
      Chuck Prince resigned as CEO in 2007 as Citigroup dealt with losses on mortgage-
       related securities and other investments. He was succeeded by Vikram Pandit.
      In 2007 the company sold its trademark red umbrella logo back to insurance firm
       Travelers, which began using the symbol nearly 150 years ago. Citigroup acquired the
       iconic logo when it bought the insurance company in 1993, and held onto it after it spun
       off Travelers in 2002. But the company ultimately decided that customers associated the
       umbrella with insurance.




                                                                                               20
Exhibit 2: Board of Directors-Current 48

           C. Michael Armstrong
            Chairman - Board of Trustees, Johns Hopkins Medicine, Health System Corporation and
            Hospital
           Alain J.P. Belda
            Chairman, Alcoa Inc.
           John M. Deutch
            Institute Professor, Massachusetts Institute of Technology
           Jerry A. Grundhofer
            Chairman Emeritus, U.S. Bancorp
           Andrew N. Liveris
            Chairman and Chief Executive Officer, The Dow Chemical Company
           Anne Mulcahy
            Chairman and Chief Executive Officer, Xerox Corporation
           Michael E. O'Neill
            Former Chairman and CEO, Bank of Hawaii Corporation
           Vikram Pandit
            Chief Executive Officer
            Citi
           Richard D. Parsons
            Chairman, Citi
           Lawrence R. Ricciardi
            Senior Vice President, General Counsel, and Advisor to the Chairman, Retired, IBM
            Corporation
           Judith Rodin
            President, Rockefeller Foundation
           Robert L. Ryan
            Chief Financial Officer, Retired, Medtronic Inc.
           Anthony M. Santomero
            Former President, Federal Reserve Bank of Philadelphia
           William S. Thompson, Jr.
            Chief Executive Officer, Retired, Pacific Investment Management Company (PIMCO)




48
     Citigroup Investor Relations: http://www.citigroup.com/citi/corporategovernance/bddir.htm


                                                                                                 21
References:

      Mergers & Acquisitions in Banking & Finance by Ingo Walter
      Citigroup corporate website: http://www.citigroup.com/citi/corporate/history/index.htm
      Hoovers Citicorp company factsheet:
       http://premium.hoovers.com/subscribe/co/boneyard/factsheet.xhtml?ID=ffffrfychfffffffff
      Yahoo Finance
      Citigroup 10-k 2007 SEC filings @ Citigroup.com:
       http://www.citigroup.com/citi/fin/data/k07c.pdf?ieNocache=511
       http://premium.hoovers.com/subscribe/co/boneyard/factsheet.xhtml?ID=ffffrfychfffffffff
      Herald Tribune article dated 7th April 1998: ‗Citicorp and Travelers Plan to Merge in
       Record $70 Billion Deal : A New No. 1:Financial Giants Unite‘:
       http://www.iht.com/articles/1998/04/07/citi.t.php
       Investopedia Article: ‗What Was The Glass-Steagall Act?’
       http://www.investopedia.com/articles/03/071603.asp
      Business Week article dated April 9 1998: The 'Coca-Cola of Personal Finance‘
       http://www.businessweek.com/1998/16/b3574073.htm
       Business Week article dated April 9 1998: The 'Coca-Cola of Personal Finance‘
       http://www.businessweek.com/1998/16/b3574073.htm
       A report by Celent on bankingtechnology.com: ‗IT spend to fall in 2009‘
       http://www.bankingtech.com/bankingtech/article.do?articleid=20000136362
      Federal Reserve Bank of Richmond Publications in Summer 1998: ‗Banks Merge To
       Stay Competitive‘ http://www.bowne.com/securitiesconnect/details.asp?storyID=1256
      Business Week article dated April 9 1998: The 'Coca-Cola of Personal Finance‘
      http://www.businessweek.com/1998/16/b3574073.htm
      Guardian-UK article dated 13 the Nov. 2008: ‗Paulson abandons plans to buy up
       America's toxic mortgage assets‘ http://www.guardian.co.uk/business/2008/nov/13/harry-
       paulson-banking-rescue- mortgage
      Washington Post article dated Sep. 15 2008: ‗ Weekend Merger Struck With Bank of
       America‘ http://www.washingtonpost.com/wp-
       dyn/content/article/2008/09/14/AR2008091401468_2.html?sid=ST2008091402574&s_p
       os=
      Citigroup Inc. history on the corporate website:
       http://www.citigroup.com/citi/corporate/history/citigroup.htm
      Article dated Jan 12 2009: One Stop Shopping Calamity:
       http://www.portfolio.com/news- markets/top-5/2009/01/12/Financial-Supermarkets
       Presentation by Philip K. Smith- Philip k. Smith Gerrish McCreary Smith, Consultants
       And Attorneys Memphis, Tennessee at the Annual Directors Conference at San Diego,
       California on November 3 - 5, 2005:
       http://www.wib.org/conferences__education/past_programs/2005_directors_conference/p
       resentations/smith_handout_dir05.pdf
       An article on Business Week dated: June 7, 1999 ‗Citigroup: Is This Marriage
       Working?‘: http://www.businessweek.com/1999/99_23/b3632001.htm
      Business Week article dated April 9 1998: The 'Coca-Cola of Personal Finance‘


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