Commentary: What Wriston Wrought

His innovations increased banking profits -- and risk

Walter B. Wriston, who died on Jan. 19 at age 85, was one of the three most influential American bankers of modern times. He ranks with J.P. Morgan, the omnipotent financier of the Gilded Age, and A.P. Giannini, whose belief in the creditworthiness of the common man in the first few decades of the 1900s was the foundation of Bank of America (BAC ). Wriston, who joined Citibank (C ) in 1946 and was its chief executive from 1967 to 1984, built it into America's biggest bank. More important, he was the pivotal figure in the transformation of the banking industry from a somnolent business straitjacketed by regulation into the global free-for-all it is today -- a decidedly mixed blessing.

Wriston's Citibank helped free consumers from the tyranny of banker's hours by popularizing such innovations as the credit card and the automated teller machine on a massive scale. Under Wriston, Citi made enormous investments in computer technology while relentlessly chipping away at prohibitions that kept banks from paying variable rates on deposits or dealing in stocks, insurance, and other financial "products." Citi also became the first truly international U.S. bank, building branch networks in dozens of countries. "Others followed the same approach, but it was Walt who saw the way the industry was going to change and was first to give voice to it," says John Reed, Wriston's successor.

Wriston's legacy is a banking industry that is incomparably more inventive and more profitable, but also far more accident-prone. "The stock market is somewhat skeptical about the model," acknowledges Reed, who left Citi in 2000. "People worry -- correctly, I think -- that banks aren't as profitable as the numbers say they are because of all the charges they end up taking." This tendency toward costly mishap was plainly evident during Wriston's tenure, mainly in the form of bad Latin American loans that Citi had recklessly amassed in the 1970s and early 1980s. In 1987, Reed set aside $3 billion -- a sum equal to four years' profits -- to cover losses on Citi's Third World debt portfolio.

In 1998, Reed fully realized Wriston's expansive vision by merging Citi with Travelers Group, the securities and insurance behemoth assembled by Sanford I. Weill, to form Citigroup. True to form, Citigroup today is at once profitable beyond the wildest imaginings of the "stiff-collar" bankers of Wriston's youth and yet unnervingly susceptible to calamity. The company took $5 billion in charges against earnings in 2004, shaving its net income to $17 billion.

Walter Wriston joined the old National City Bank in 1946 for lack of a better alternative. "If I were to sit up at night making a list of everything dull, banking would (have) come out on top," he told biographer Phillip L. Zweig. It's hardly dull now, and that is more Wriston's doing than any one else's.

By Anthony Bianco

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