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.
NEXT GENERATION: The four plants in the Central Taiwan Science Park, designated Fab 25, would consist of four 1.4-nanometer wafer manufacturing plants, TSMC said Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) plans to begin construction of four new plants later this year, with the aim to officially launch production of 2-nanometer semiconductor wafers by late 2028, Central Taiwan Science Park Bureau director-general Hsu Maw-shin (許茂新) said. Hsu made the announcement at an event on Friday evening celebrating the Central Taiwan Science Park’s 22nd anniversary. The second phase of the park’s expansion would commence with the initial construction of water detention ponds and other structures aimed at soil and water conservation, Hsu said. TSMC has officially leased the land, with the Central Taiwan Science Park having handed over the
AUKUS: The Australian Ambassador to the US said his country is working with the Pentagon and he is confident that submarine issues will be resolved Australian Ambassador to the US Kevin Rudd on Friday said that if Taiwan were to fall to China’s occupation, it would unleash China’s military capacities and capabilities more broadly. He also said his country is working with the Pentagon on the US Department of Defense’s review of the AUKUS submarine project and is confident that all issues raised will be resolved. Rudd, who served as Australian prime minister from 2007 to 2010 and for three months in 2013, made the remarks at the Aspen Security Forum in Colorado and stressed the longstanding US-Australia alliance and his close relationship with the US Undersecretary
‘WORLD WAR III’: Republican Representative Marjorie Taylor Greene said the aid would inflame tensions, but her amendment was rejected 421 votes against six The US House of Representatives on Friday passed the Department of Defense Appropriations Act for fiscal 2026, which includes US$500 million for Taiwan. The bill, which totals US$831.5 billion in discretionary spending, passed in a 221-209 vote. According to the bill, the funds for Taiwan would be administered by the US Defense Security Cooperation Agency and would remain available through Sept. 30, 2027, for the Taiwan Security Cooperation Initiative. The legislation authorizes the US Secretary of Defense, with the agreement of the US Secretary of State, to use the funds to assist Taiwan in procuring defense articles and services, and military training. Republican Representative
TAIWAN IS TAIWAN: US Representative Tom Tiffany said the amendment was not controversial, as ‘Taiwan is not — nor has it ever been — part of Communist China’ The US House of Representatives on Friday passed an amendment banning the US Department of Defense from creating, buying or displaying any map that shows Taiwan as part of the People’s Republic of China (PRC). The “Honest Maps” amendment was approved in a voice vote on Friday as part of the Department of Defense Appropriations Act for the 2026 fiscal year. The amendment prohibits using any funds from the act to create, buy or display maps that show Taiwan, Kinmen, Matsu, Penghu, Wuciou (烏坵), Green Island (綠島) or Orchid Island (Lanyu, 蘭嶼) as part of the PRC. The act includes US$831.5 billion in
RSS