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Say goodbye to the Citi’s Financial Supermarket !

By Amarendra Bhushan for CEOWORLD Magazine Updated:January 16, 2009

“TOO big to fail, too shit to buy” Ichabod, Ichabod, how thy glory is departed! A Citi House built on sand; it fell after the rain, what a great fall. How true! How many more such fall to come?

The model of a one-stop financial filling station based on cross-selling still makes sense when sensibly managed, but the fatal reward system that thrived on unbridled risk-taking took the focus off risk management. Citibank often innovated, no bad idea if the innovation is real and not just ”they must know something we don’t.” It seems the only solution for Citibank is on Chinese Communist Party’s hands. That’s a dramatic end for the imperial role of USA in world politics and economy!

What happens to the government stake if Citi goes under?
The triple “A” papers are garbage. Who is rating them?
Should the government put Citigroup (C) out of its misery and just nationalize the massive money center bank?

Struggling US banking giant Citigroup has announced plans to split the firm in two, as it reported a quarterly loss of $8.29bn (£5.6bn). It said it would realign into two new firms, Citicorp and Citi Holdings — to “optimize the company’s global businesses for future profitable growth and opportunities.”

A) Citicorp- It will focus on retail bank; the corporate and investment bank; the private bank, which serves wealthy individuals; and global transaction services.

B) Citi Holdings- It will on brokerage and retail asset management, local consumer finance, and a pool of assets that require special management. Citi Holdings will include Citi’s asset management and consumer finance segments, including Citi Mortgage and CitiFinancial. It will also be in charge of Citi’s 49% 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.

What is good bank/bad bank Plan for Citigroup?

The good assets will be in the universal bank known as Citicorp, while the troubled assets will be in the unit known as Citi Holdings.

I think, that all big banks/financial should be Nationalized. Bailout does not make sense. It is like putting good money with bad money. I think the biggest problem is of confidence and customer relationship. Big banks are too big and they have lost touch with end customer. Nobody know what is on the books.

The triple “A” papers are garbage. Who is rating them? Rating agencies do not know themselves and analyst are writing papers just for the sake of filling in time,. Only way out is that government take control of these institutions. All high salaries and executives should be sacked. They do not deserve a penny.

Also, if government want to bail out, and restore confidence than, they should create bank account for the tax payers. Let’s call it a tax payer fund. Here each tax payer is issued shares based as it is tax money or public money.

Chief Executive Officer Vikram Pandit agreed this week to cede control of the Smith Barney brokerage to Morgan Stanley. He also said today he plans to eventually sell the CitiFinancial consumer-lending unit and Tokyo-based Nikko Asset Management Co., after moving them into a new unit called Citi Holdings.

- An $8.29 billion, or $1.72 per share fourth-quarter loss
- Citigroup posted $28.3 billion of writedowns and credit losses
- Total credit losses over 15 months to more than $92 billion.
- Last year-earlier loss of $9.8 billion, or $1.99 a share.
- Citigroup is splitting into two operating units
- The bank is considering selling off Citi Holdings assets, or letting them mature on their own.
- For the full year 2008, Citigroup reported a net loss of $18.72 billion.
- Analysts surveyed by Thomson Reuters expected Citigroup to report a loss of $1.31 a share.
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“Given the economic and market environment, we have decided to accelerate the implementation of our strategy to focus on our core businesses, This will help in our ongoing efforts to reduce our balance sheet and simplify our organization. We are setting out a clear roadmap to restore profitability. We are committed to helping the financial markets recover as quickly as possible” said Citigroup chief executive Vikram Pandit.

Mr. Pandit faces a similar quandary at Citigroup Inc., which is likely to announce Friday an operating loss of at least $10 billion for the fourth quarter, according to people familiar with the situation. Net losses reported since the 52-year-old Mr. Pandit took over as chief executive in December 2007 are likely to surpass $25 billion.

Citigroup also is expected to detail the downsizing strategy aimed at dismantling pieces of the financial supermarket that Mr. Pandit repeatedly defended even as the credit crisis and recession overwhelmed his efforts to tackle problems haunting the company long before he arrived. writes DAVID ENRICH

“I think people knew it was going to be bad, but I’m surprised it’s this bad,” said Matt McCormick, portfolio manager at Bahl & Gaynor Investment Counsel in Cincinnati.

“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.

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