When I think about banks, I often think about Citigroup (NYSE:C) as being in a league of its own. It isn’t because of its performance, which has left a lot to be desired over the past decade. It’s rather because of its emphasis on international banking.
There are a number of ways to show this, but one of the most obvious is to look at the distribution of Citigroup’s deposits. More than half of the New York-based bank’s deposits are held in offices outside the United States:
Even a cursory glance at this chart shows how different Citigroup is from the three other megabanks that sit atop the financial-services industry. JPMorgan Chase, which also has a large international presence, only has 17% of its deposits held in overseas offices. Meanwhile, Wells Fargo and Bank of America both come in at less than 10%.
This goes to the core of Citigroup’s business model. It was roughly a century ago that the bank became one of the first in the United States to establish a global banking presence, gaining footholds throughout Asia, Europe, and Latin America, in addition to its operations in the United States.
Citigroup not only has offices in other countries, but its operations abroad also pivot around consumer banking, the primary purpose of which is to attract deposits. This distinguishes it from the three other banks in the chart, whose international operations focus more on investment banking, as is the case with JPMorgan Chase and Bank of America in particular. The purpose of investment banking is to help global corporations issue debt and equity, manage risk, and move money around the world.
Citigroup’s extensive overseas presence is a double-edged sword. While it serves to distinguish the $1.8 trillion bank from its peers, it also introduces another layer of risk.
In the lead-up to the Great Depression, for instance, Citigroup gained notoriety for selling toxic Latin American bonds to its customers in the United States. And throughout the Latin American debt crisis in the 1980s and 1990s, Citigroup came within a hair’s breadth of failure because of overexposure to soured bonds issued by the likes of Brazil and Argentina.
In an effort to reduce risk and simplify its business model since the financial crisis, Citigroup has pared down its operations abroad. In 2008, for instance, it sold its Japanese trust banking unit to Mitsubishi UFG Trust and Banking. Citigroup followed that up a year later by selling its retail brokerage business in Japan. And six years after that, it did the same with its retail banking operations in the East Asian country.
These moves have simplified and streamlined Citigroup’s business model. They’ve also helped the bank raise capital and de-risk its operations. But even though they represent a retreat for Citigroup in terms of its long-term focus on global banking, it’s clear from the chart that the bank continues to distinguish itself from its peers in terms of the size and reach of its international footprint.