Friday, January 16, 2009

Citigroup posts $8.29B loss, splits up the company

Citigroup posts $8.29B loss, separates traditional banking business from riskier ventures NEW YORK (AP) -- Citigroup said Friday it is splitting up into two businesses as it reported a fourth-quarter net loss of $8.29 billion -- its fifth straight quarterly loss.

In Citigroup's reorganization, one business, Citicorp, will focus on traditional banking, while the other, Citi Holdings, will hold the company's riskier assets.

The move will allow Citigroup to sell or spin off the Citi Holdings assets to raise cash. It also reveals the company's growing focus on back-to-basics lending and deposit-gathering, and dismantles the "financial supermarket" created a decade ago.

Some investors have been calling for a breakup of Citigroup for years, as the bank struggled to keep up with its Wall Street peers. Those calls grew louder as the mortgage crisis caused the company's troubles to mount.

There has been harsh blame for Citigroup's woes directed at the board, too -- and the company said Friday it plans to get rid of more board members after the recent departure of long-time director and former Treasury Secretary Robert Rubin.

"There has been one announced departure from the board. Together with other anticipated departures, this gives us the opportunity to reconstitute the board and we will do so as quickly as possible," said Richard Parsons, Citi's lead director, in a statement.

The New York-based bank's fourth-quarter loss amounted to $1.72 per share. Analysts expected a loss of $1.31 per share. While the per-share loss was higher than the consensus estimate, the total loss was smaller than the $10 billion many investors feared. For the year-ago fourth quarter, Citigroup had a net loss of $9.83 billion, or $1.99 per share.

For the latest quarter, Citigroup marked down $7.8 billion in securities and banking revenue, and $5.3 billion on the value of credit derivatives. It also lost $2.5 billion in private equity and equity investments, $2 billion in restructuring costs, and $6 billion to add to reserves.

The company's new structure is a reversal back to 1998, when John Reed's Citicorp merged in 1998 with Sandy Weill's financial services conglomerate Travelers Group.

The new Citicorp will include the retail bank; the corporate and investment bank; the private bank, which serves wealthy individuals; and global transaction services.

Citi Holdings will include Citi's asset management and consumer finance segments, including CitiMortgage and CitiFinancial. It will also be in charge of Citi's 49 percent stake in the joint brokerage with Morgan Stanley, and the pool of about $300 billion in mortgages and other risky assets that the U.S. government agreed to backstop late last year.

Citigroup said it entered a definitive agreement on that deal with the government on Thursday. The government has already lent the bank $45 billion.

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