Citigroup to shed more than $400B

After months of poring over Citigroup's various business holdings, CEO Vikram Pandit delivered the massive restructuring plan that shareholders had been bracing for, revealing that the beleaguered bank would unload more than $400 billion in assets over the next few years.

Pandit, who just took office last December, made the announcement during the company's investor and analyst conference, saying it represented the first stage of a three-part plan aimed at whipping the New York-based bank into shape.
"It's all about getting fit," he said.

Ultimately, Citigroup said it would get rid of roughly $500 billion in so-called legacy assets, or about 22% of the company. Given the current market conditions, the company said it expected to wind down those assets to less than $100 billion over the next two to three years.

Citigroup did not name specific divisions it would shed, but said the bulk would come from its consumer banking and securities divisions. The company also plans to let some of its other businesses - such as its toxic real estate assets - run off, said Pandit.

Some investors were pleased by the news, including Chris Armbruster, research analyst at Al Frank Asset Management in Laguna Beach, Calif., which owns shares of Citi.

"This isn't something that is going to fix the company overnight," said Armbruster. "But it looks like they are addressing some problems."

Wall Street, however, was disappointed by the news: Citi (C, Fortune 500) shares fell nearly 3% in Friday trading.

The company was widely expected to deliver big restructuring news during Friday's meeting, with some anticipating that Pandit would go so far as to enact a breakup of the banking icon.
Instead, the former Morgan Stanley (MS, Fortune 500) executive said he remained committed to the company's universal bank model, which had become fodder for Citi critics in recent years.
"We believe the right model is a global universal bank," he said. "This is the model that delivers the most shareholder value."

Pandit pushing for change

Since ascending to the throne of CEO following the high-profile departure of Charles Prince, Pandit has attempted to whip into shape what some critics have called the company's bloated corporate structure.

Just this week, Citi and State Street Corp. (STT, Fortune 500) announced plans to sell CitiStreet, a joint venture by the two firms, for $900 million. Last month, Citi announced the sale of its commercial lending and leasing business to General Electric (GE, Fortune 500), and plans to get rid of Diners Club International.

Citigroup also has been focused on cost-cutting efforts as of late. Last month, the company said it planned to cut 9,000 jobs across the firm, on top of the 4,200 cuts announced during the previous quarter.

On Friday, Citigroup's Chief Financial Officer Gary Crittenden said he expected the restructuring to deliver $15 billion in savings to the company and ultimately boost profitability.
Risk management and Citi's capital levels were also front and center during the meeting, as executives stressed that the company was well positioned going forward to either invest or safeguard against additional losses.

Pandit also took Friday's powwow with investors and analysts to provide some guidance about the company's continuing priorities, which include growing Smith Barney, Citigroup's highly profitable wealth management business. At the same time, the Citi CEO stressed that management was focused on shoring up its securities operations by creating a commodity trading business and prime brokerage unit, which typically service hedge fund clients.
"We do have some major product gaps," he said.

With a presence in 106 countries, Citi's management team stressed that it would attempt to leverage its global reach into building certain aspects of the firm, like the company's credit card business.

The company added that it was aiming for 9% revenue growth going forward, after suffering through what arguably has been one of the toughest periods in the firm's 196-year history.
Citi capped a particularly tough 2007 by posting a $10 billion fourth-quarter loss - the worst ever in its storied history. Citi followed that up last month by recording another staggering loss, worth $5.1 billion, for the first quarter of 2008.