Is Citigroup The Dumbest Bank Ever?

Photo Source: Wiki.wooster.edu

Back in 2006, when the housing bubble was entering its truly (and obviously) manic phase, mega-bank Citigroup was being pressured by Wall Street to grow faster. And rather than pushing back against what were clearly ill-timed demands from desperately-short-sighted analysts, Citigroup CEO Chuck Prince uttered some words — and adopted a strategy — that live on in the annals of banker cluelessness:

“As long as the music is playing, you’ve got to get up and dance.”

Here’s how Businessweek covered the story at the time:

“The concerns are perfectly legitimate,” says [CEO Charles “Chuck”] Prince. “People are saying ‘Do something!’ They want to know how long is this guy going to take?” Not to worry: “Investors will be happy to hear that Prince is dropping hints that he’s revving up the deal engine again. He laments that for the past three years he had to stay out of the market and focus exclusively on making existing operations more profitable. ‘We’re getting ourselves back on the playing field,’ he said, noting that most of the acquisitions will be in foreign markets. There’s already chatter in London that he’s eyeing Lloyds Bank or BNP Paribas.

Here in the U.S., consumers are Prince’s target. “If we don’t grow consumer, the whole place has modest growth,” he says. Prince is planning big branch expansions in locations where many customers of the company’s Smith Barney brokerage business live, hoping to sell them bank products. In Boston, for instance, Citi is planning to build 30 branches next year as a service to 30,000 Smith Barney clients. If it’s successful, Citi will roll out new branches in Philadelphia and a half-dozen other cities.

And some, at least, in the financial community think this is a good idea. “We are impressed by [Citi’s] organic growth efforts, including 785 new branches year-to-date,” said one analyst.