Chapter 1.1. Citicorp


City Bank of New York was founded by the first commissioner of the US Treasury, colonel Samuel Osgood. In 1865 the bank joined the national banking system and became The National City Bank of New York. In 1894, it became the biggest bank in the United States, and in 1902, it began expanding internationally to London and Shanghai and became the first major American bank to establish a foreign department. In 1913 it was the first contributor to the Federal Reserve Bank of New York. By 1939 The National City Bank had 100 offices abroad.

After the World War Two, the bank expended its retail banking and in 1955 it merged with First National Bank to become First National City Bank. Base of the latter, in 1968 First National City Corp emerged as a holding company and was renamed Citicorp in 1974.

In 1970s Citicorp was a major issuer of Visa and MasterCard credit cards. By 1977 it was the largest US credit card provider followed by acquisition of Carte Blanche and Diners Club in 1978 and 1981 respectively. Under John Reed, Citicorp was the first bank to introduce ATMs on a wide range.

In 1981, Citibank became the largest bank in the United States passing BankAmerica and continued to grow in various regions of the US. However, the decade of 1980s was rather problematic for Citicorp. Its loans to other countries, above all to Latin America, faced liquidity problem. In 1987 and 1989, Citicorp made $4 billion loan-loss provisions. Not only this, Citicorp also suffered from the recession in the real estate market.

Citicorp recapitalised by raising $2.6 billion, almost a forth of its capital, from Saudi Prince in earlier 1990s. The company had to sell its assets and paid no dividends. In 1992, regulatory put the bank under the special supervision that limited its ability to issue loans. In 1993 it lost nearly 40% of its real-estate portfolio being forced to sell the assets. It recovered in 1995 by selling the remaining parts of the portfolio and made it to breakeven.

In 1996 Citibank Mexico was accused in money laundering. Fortunately, it cost only $4 million of legal fees. Despite for the scandal, the bank acquired another Mexican bank Banco Confia, which was also charged in laundering drug money. Back in the US, a rising consumer bankruptcy deteriorated Citicorp’s profit by credit card write-offs.