The global financial supermarket is out of fashion, as CEOs jettison businesses and exit countries
Birth of a behemoth: Sanford Weill, left, and John Reed in 1998 as they announce the merger of Travelers and Citicorp, forming Citigroup. — Photo: Richard Drew/ASSOCIATED PRESS
Eighteen years ago, Sanford Weill declared the dawn of a new era in banking.
Mr. Weill, then chief executive of Travelers Group Inc., had agreed to merge with John Reed’s Citicorp, forging what would become the first financial supermarket to the world.
“Our company will be so diversified and in so many different areas that we will be able to withstand” the inevitable downturns to come, Mr. Weill said in April 1998.
Citigroup Inc., as it was christened, is still intact. But confidence in the model Messrs. Weill and Reed espoused is in decline.
After nearly two decades of breakneck expansion into ever more countries and ever more businesses, global banks are in retreat. For most of them, it is no longer a viable strategy to try to be all things to all customers around the world.
A McKinsey & Co. review of 10 global banks, conducted for The Wall Street Journal, found that those lenders were present on average in 65 countries in 2008. By last year, the average footprint had shrunk to 55 countries. And the McKinsey research doesn’t include Citigroup, which has unveiled plans in recent years to exit retail-banking businesses in at least 20 nations.
The pace has quickened this year. Barclays PLC said it would sell much of its business in Africa, while HSBC Holdings PLC is pulling out of Brazil, one of about 83 businesses around the world it has shed since 2011.
Mr. Weill, who retired as CEO in 2003, still sees value in being global.
“The economy is a global village, and we need global financial institutions that bring it together,” he said in an interview. “What would happen if we had a telecommunications system that was locally based, and couldn’t connect? It wouldn’t be very good.”
That view is now out of favor. Analysts have called for J.P. Morgan Chase & Co. and Citigroup to break up, and the issue of whether banks are too big is a recurring topic on the presidential campaign trail.