Sandy Weill, the engineer of supermarket banking through his creation of Citigroup (NYSE: C), has now spurned the notion of massive banks and turning his back on what amounted to his career’s crowning achievement.
Weill displayed this notion last week on CNBC’s Squawk Box, leaving market insiders to wonder why he has changed his tone after championing the cause and fighting for it for so long. Financial Times editor Gary Silverman conducted an interview with Well ten years ago while he was a reporter at FT, and Weill made some interesting observations that may have foreshadowed this change of heart.
At the time Weill told him that “weird” things were beginning to happen in Citigroup’s stores. It turned out that buying cabbages and carrots at the same place was not the same as buying auto-insurance and a home equity loans at the same place. Weill stated that “…what Citigroup discovered was that its borrowers – many of them people with tarnished credit histories – were unusually bad drivers. Citigroup was selling them auto insurance just in time for them to crash their cars and cost Mr Weill and his shareholders lots of money. He further added that “The people who decided to buy auto or homeowner (insurance) through us turned out to be more risky than average. It just didn’t play well together.”
Although Weill is retired, he remains an addicted monitor of Citi’s performance. With Citigroup now trading for half as much as retail giant Wells Fargo (NYSE: WFC), perhaps the market is telling us that bigger isn’t necessarily better after all.