Citibank sees $40billion upside in corporate marketing

I read in this week's Fortune, that Citi's shareprice has risen just 3% since Q3 2003, compared to rival bank of America's 22%. The discrepancy, on a market cap' of $250billion is a figure a little north of $40bn. Ouch. CEO Chuck Prince acknowledges the discrepancy is largely attributable to a spate of governance failures in 2003/4. The most visible failures relate to persistent regulatory breaches at Citibank's Japanese private banking arm, plus July's notorious Eurobond incident in London, when the bank created market havoc by some over-zealous, profit hungry traders dumping $11bn of bonds onto the market, creating an ultra-profitable downward pricing spiral, subseuqnetly investigated by the FSA. Added to this are mysterious employee suspensions in China, for 'lying to regulators'. The total cost in hard cash is trivial - a drop in the ocean compared to the relationship and reputational capital lost. The company will still make nearly $18bn profit this year. But Prince is clearly desperate to make amends. One senses his personal pride and a sense of duty are at stake here. Prince now talks of his priority as protecting 'the franchise'. He means the corporate brand, of course. Or certainly its reputation. He believes he can rebuild the value through more effective expression of the dormant brand values. The company is taking substantive action to remove the cultural monomania around profits, which is seen as the root cause of the aberrance. He publicly admits: "One of the things we're putting into place, starting in 2005, is a series of activities - training, communications, performance approaisals - that will lend a little more balance to the aggressive financial culture that we have always celebrated...I believe the celebration of financial results causes people at the edges to act in ways that are singular." I'm not sure if 'singular' means or here, and just individualistic, but the message is quite startling for the world's largest bank. "Culture is a set of shared, unspoken assumptions. And when we were a smaller company, thise unspoken assumptions had great weight... The larger the company has become, the more we need to speak about those unspoken assumptions." Prince is embracing the import of corporate marketing here - articulating a dormant value-set, and translating it into demonstrable processes and policies, in an attempt to recover value with its most critical stakeholders. What is really ironic here, though, is that Citibank can still lay claim to be the world's 13th 'best' brand, according to Prince. This exposes the meaningless nature of those brand surveys which look only at the external face of the brand, and not at its internal health. Its coherence and consistency. Enterprise-wide, and for all stakeholders. It's great to see CEOs increasingly recognise the power, and fragility of 'the franchise' they enjoy with stakeholders. And equally reassuring to see the market reacting way before customers, to recognise the erosion of value. In embracing a corporate marketing approach, Prince implictly points to the emptiness of brand measures which ignore the impact of reputational transparency.


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