If balance sheet is the ultimate weapon, Citigroup should be knocking the competition dead. Since the brawn bought some brains three years ago, it has become clear that the combination of an investment bank and a commercial bank works. But the merged entity hasn't yet made it into the top three in every product area and achieving across-the-board success could be a long, hard slog.
It's easy to understand the appeal of the hybrid banking model for corporate treasurers. When economic conditions are dicey, customers appreciate the security a big balance sheet provides when they're doing capital-market transactions. "In the last cycle, companies wanted to have a name behind them," says Benoit Vincenzi at Fox-Pitt Kelton. "That's why so many dot coms chose Goldman Sachs or Morgan Stanley for their IPOs. In the next cycle, this will probably be different. Investors are not prepared to buy all issues and so distribution and the ability to offer alternatives to equity are going to be the key requirements."
Citigroup has managed to cross-sell an investment banking product to 40% of its bank-loan customers in the past 18 months, it claims. Yet it's debatable whether Citigroup has been any more successful than would have been expected given the components from which it was built.