Friday, May 9, 2008

Shrinking Citi

The banking giant said Friday it will sell at least $400 billion of the $500 billion in legaccy assets it identified as "not central" to its mission, including $170 billion worth of marked-to-market assets in its investment banking division. The planned sale, which will take place over the next three years, is more than double what analysts expected.

For example, of the $500 billion in "legacy assets," $30 billion is in highly leveraged loan commitments, another $25 billion is toxic subprime collateralized-debt obligations, and $55 billion is in off-balance-sheet entities that are highly illiquid. The rest are in real estate ($175 billion) and auto loans ($20 billion).

The New York Times on Friday said Pandit is preparing to sell Citigroup's Primerica Financial life insurance and mutual fund complex, the business on which Sandy Weill built his financial empire. Other divisions likely for sale are a back-office outsourcing unit in India, retail brokerage operations in Australia, and possibly bank branches in Germany, according to the paper. Citigroup, according to sources, also may be trying to sell its defined-benefit business operations in Latin America.

Citi needs to cut at least 45,000 jobs and eliminate the dividend today and sell non-core assets over the balance of this year not 3 years!