Citigroup CEO: Supermarket Banking ‘A Strategy That I Don’t Believe Is Right For The Times’

Citi CEO Vikram Pandit

In the late 1990s, Citicorp made waves on Wall Street by pioneering what is known as “supermarket banking” — the idea that financial institutions could provide a host of services, including stock trading, real estate brokerage, and insurance, in addition to traditional deposit banking. Citicorp, led by chief executive Sanford Weill, purchased insurance giant Travelers Group and became Citigroup, and in subsequent years, other banks followed its model, creating the financial supermarkets that are prevalent today.

A decade and a half and a major financial crisis later, current Citigroup CEO Vikram Pandit now says the supermarket model is no longer a viable option for his bank, which nearly collapsed in the 2008 banking crisis that helped trigger the Great Recession. In a presentation at Singapore’s Lee Kuan Yew School of Public Policy, Pandit said supermarket banking “is a strategy that I don’t believe is right for the times,” American Banker reports:

The 1998 merger of Citicorp with insurer Travelers Group Inc. “didn’t turn out to be everything people thought it was going to be,” Pandit said today during a presentation at Singapore’s Lee Kuan Yew School of Public Policy. “The focus of that merger, which was supermarket banking or financial supermarket, is a strategy that I don’t believe is right for the times. Not only that, I don’t believe it’s right for our bank.”

Weill, the original architect of supermarket banking, said last month that it was time to break up the big banks, a position that has been echoed by other former banking executives. Pandit said this week that he disagrees with that sentiment because Citigroup has returned to the core of what it was before it was a supermarket. “Getting out of that strategy is what we’ve done,” Pandit said. “And now we focus on what is really the core banking business of this institution.”

Whether Citi has actually returned to its commercial banking roots is questionable. The New York Times reported that Citi had more assets in risky global capital markets in the second quarter than any bank but Goldman Sachs, and it is “more reliant on often volatile Wall Street businesses” than it used to be. “In 1998,” the Times wrote, “Citicorp’s trading revenue was 8 percent of its total revenue. By contrast, trading revenue last year accounted for 23 percent of the Citicorp unit’s total.” Citi did, though, announce earlier this year that it would cut its proprietary trading desk ahead of implementation of the Volcker Rule, which bans banks with government backing from engaging in risky prop trades.