US banking giant Citigroup abandoned its “supermarket” model on Friday in the face of a deepening global financial crisis, announcing a split into two businesses as it retrenches in the face of massive losses.
The New York banking group reported a hefty US$8.29 billion loss in the fourth quarter. The loss per share was US$1.72, dwarfing most analysts’ predictions of a US$1.19 loss.
Fourth-quarter revenue fell 13 percent to US$5.6 billion.
PHOTO: BLOOMBERG
The bottom line was under severe pressure, including from a US$6 billion net loan loss reserve build, a US$2 billion restructuring charge and US$5.6 billion in writedowns.
“We continued to make progress on our primary goal in 2008 — which was to get fit,” Citi chief executive Vikram Pandit said.
Citi said the US government had finalized the terms of its guarantee against possible large losses on an asset pool of US$301 billion, US$5 billion below the original Nov. 23 announcement.
For the full year last year, Citigroup posted a net loss of US$18.72 billion, or US$3.88 per share, better than market expectations of US$3.24. Citi shed 52,000 jobs in a cost-cutting restructuring.
Citigroup said it would separate the company into two businesses — Citicorp and Citi Holdings — abandoning the sprawling financial “supermarket” model it had built over the years.
“Given the economic and market environment, we have decided to accelerate the implementation of our strategy to focus on our core businesses,” Pandit said.
The bank said Citicorp would be a commercial bank operating in more than 100 countries, with assets estimated at US$1.1 trillion.
It would group Citigroup’s investment bank, private bank, financial services, commercial bank and credit card businesses.
Citi Holdings will group the bank’s “non-core businesses,” including brokerage and retail asset management.
The bank acknowledged the legal, fiscal and regulatory complexity of the overhaul, but said the realignment would begin immediately and the second-quarter results would be presented under the new organization.
Briefing.com analyst Patrick O’Hare said the picture looked bleak.
“Citigroup, which plans to split into two units now, may have eased concerns about a worst-case scenario for equity holders for the time being, but it didn’t provide any basis for wanting to own the stock for anything other than a trade,” O’Hare said.
Standard & Poor’s affirmed Citi’s credit rating, but analyst Scott Sprinzen said: “We are placing a high degree of emphasis on the availability of future extraordinary government support.”
On Wall Street, Citi shares tumbled 3.66 percent to US$3.69 in late trading. The share has plunged 84 percent from a year ago.
Citigroup said it would put its 49 percent stake in its new brokerage joint venture with Morgan Stanley under Citi Holdings. The partners announced on Tuesday the deal to create Morgan Stanley Smith Barney, the world’s biggest retail brokerage.
Citi Holdings also will include the Japanese businesses Nikko Cordial Securities and Nikko Asset Management, insurer Primerica, consumer financing and a special asset pool insured by the US government.
Citigroup, which had been the world’s biggest financial company but has been hammered by heavy losses in the financial crisis, has received a total of US$45 billion in capital injections from the US Treasury to shore up its finances.
Pandit pledged that the bank would speed up the use of the Treasury’s rescue from its US$700 billion Troubled Asset Relief Program (TARP).
“We are committed to helping the financial markets recover as quickly as possible. To accelerate that recovery Citi is putting the TARP capital it has received to work to support the US economy and consumers — expanding the flow of credit to US households and businesses responsibly and on competitive terms,” he said.
NO-LIMITS PARTNERSHIP: ‘The bottom line’ is that if the US were to have a conflict with China or Russia it would likely open up a second front with the other, a US senator said Beijing and Moscow could cooperate in a conflict over Taiwan, the top US intelligence chief told the US Senate this week. “We see China and Russia, for the first time, exercising together in relation to Taiwan and recognizing that this is a place where China definitely wants Russia to be working with them, and we see no reason why they wouldn’t,” US Director of National Intelligence Avril Haines told a US Senate Committee on Armed Services hearing on Thursday. US Senator Mike Rounds asked Haines about such a potential scenario. He also asked US Defense Intelligence Agency Director Lieutenant General Jeffrey Kruse
INSPIRING: Taiwan has been a model in the Asia-Pacific region with its democratic transition, free and fair elections and open society, the vice president-elect said Taiwan can play a leadership role in the Asia-Pacific region, vice president-elect Hsiao Bi-khim (蕭美琴) told a forum in Taipei yesterday, highlighting the nation’s resilience in the face of geopolitical challenges. “Not only can Taiwan help, but Taiwan can lead ... not only can Taiwan play a leadership role, but Taiwan’s leadership is important to the world,” Hsiao told the annual forum hosted by the Center for Asia-Pacific Resilience and Innovation think tank. Hsiao thanked Taiwan’s international friends for their long-term support, citing the example of US President Joe Biden last month signing into law a bill to provide aid to Taiwan,
China’s intrusive and territorial claims in the Indo-Pacific region are “illegal, coercive, aggressive and deceptive,” new US Indo-Pacific Commander Admiral Samuel Paparo said on Friday, adding that he would continue working with allies and partners to keep the area free and open. Paparo made the remarks at a change-of-command ceremony at Joint Base Pearl Harbor-Hickam in Hawaii, where he took over the command from Admiral John Aquilino. “Our world faces a complex problem set in the troubling actions of the People’s Republic of China [PRC] and its rapid buildup of forces. We must be ready to answer the PRC’s increasingly intrusive and
STATE OF THE NATION: The legislature should invite the president to deliver an address every year, the TPP said, adding that Lai should also have to answer legislators’ questions The Chinese Nationalist Party (KMT) yesterday proposed inviting president-elect William Lai (賴清德) to make a historic first state of the nation address at the legislature following his inauguration on May 20. Lai is expected to face many domestic and international challenges, and should clarify his intended policies with the public’s representatives, KMT caucus secretary-general Hung Meng-kai (洪孟楷) said when making the proposal at a meeting of the legislature’s Procedure Committee. The committee voted to add the item to the agenda for Friday, along with another similar proposal put forward by the Taiwan People’s Party (TPP). The invitation is in line with Article 15-2