Restructuring Citigroup: The Bank in Trouble

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Case Details:

Case Code : BSTR330
Case Length : 19 Pages
Period : 2000-2009
Pub Date : 2009
Teaching Note :Not Available
Organization : Citigroup
Industry : Banking & Financial Services
Countries : US

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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"If you're an entity of this size, if you don't have controls, if you don't have the right culture and you don't have people accountable for the risks that they are taking, you're Citigroup."¹

- Lynn Turner, Former Chief Accountant, Securities and Exchange Commission, US, in November 2008.

"We had a market-risk lens looking at those products, not the credit-risk lens looking at those products. When it in fact was a credit event, the bank was caught off guard. Next time, it hopes to take a more integrated approach."²

- Gary Crittenden, CFO, Citigroup, in March 2009.

Introduction

On February 20, 2009, Citigroup (Citi) shares crashed by over 22% to close at US$ 1.95, the lowest price seen since January 1991 (Refer to Exhibit I for the Stock Price Chart of Citigroup from January 1990 and April 2009).

Strong rumors that the bank would be nationalized led to widespread panic in the equity market, resulting in a major sell-off in Citi shares. Due to the sell-off, the market capitalization of the bank came down to about US$ 10 billion. Till then, the US government had infused US$ 45 billion into Citi in exchange for the bank's preferred stock.

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1] "Citigroup Saw No Red Flags Even As It Made Bolder Bets," www.nytimes.com, November 22, 2008.
2] Eric Dash, "Citigroup Acknowledges Poor Risk management," www.nytimes.com, October 16, 2007.

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