Citi Loses $8.3 Billion, Will Reorganize into 2 Units

By Bradley Keoun and Josh Fineman

Jan. 16 (Bloomberg) -- Citigroup Inc. posted an $8.29 billion fourth-quarter loss, completing its worst year, as the credit crisis eroded mortgage-bond prices and customers missed more loan payments.

The net loss of $1.72 a share compared with a loss of $9.8 billion, or $1.99, a year earlier, the New York-based company said in a statement today. The results included a $3.9 billion gain from the sale of a German consumer bank. Analysts, excluding the gain, estimated the company would report a loss of $1.08 a share, according to a survey by Bloomberg.

As Citigroup plunged 77 percent last year in New York trading, the bank was forced to accept $45 billion of U.S. government rescue funds. 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 sell the CitiFinancial consumer-lending unit and Tokyo-based Nikko Asset Management Co..

“We view the divestiture of Smith Barney as a signal that conditions have materially weakened even from the lousy conditions that prevailed in late 2008,” CreditSights Inc. analyst David Hendler wrote in a Jan. 14 note to clients.

Citigroup fell 15 percent yesterday to $3.83 in New York Stock Exchange composite trading, partly on speculation the bank’s shareholders may suffer if Citigroup has to seek more government money. Spokesman Mike Hanretta declined to comment on whether the bank is in discussions over an additional infusion.

Pandit’s Strategy

A dwindling capital cushion and sinking stock price forced the 52-year-old Pandit to abandon Citigroup’s decade-old strategy of providing investment advice alongside branch banking, stock underwriting and corporate lending. He’s shedding units to free up capital and save the bank from insolvency.

“They are going to try to home in on what’s worth something, and try and sell the pieces that they really can’t value,” Todd Colvin, vice president of MF Global Inc., said in a Bloomberg TV interview.

The bank also said its Primerica Financial Services, a Duluth, Georgia-based life insurance company, will no longer be considered among “core” operations, which include banking, securities underwriting, corporate lending and payment- processing businesses.

CitiFinancial and Primerica were both building blocks of the colossus that former CEO Sanford “Sandy” Weill assembled during a 17-year acquisition spree. The company solidified its strategy of serving corporate and individual clients around the world with a range of financial services in 1998, when Weill’s Travelers Group Inc. merged with John Reed’s Citicorp to form Citigroup Inc.

Joint Venture

Citigroup plans to put Smith Barney into a $21 billion joint venture and relinquish majority control to Morgan Stanley. The deal, which bolsters Citigroup’s capital base with a $5.8 billion pretax gain, came less than two months after Pandit told employees he didn’t want to sell the business.

The plan to cut off “non-core” businesses in a deteriorating economy may put the bank into a deeper hole, Sanford C. Bernstein & Co. analyst John McDonald wrote in a Jan. 14 report.

“It will likely be difficult for Citi to effectively dispose of assets and businesses in the current environment,” McDonald wrote. “Any new solution is likely to need an incremental infusion of common equity, either from the government, private investors or the public markets, any of which is likely to be dilutive to existing Citi shareholders.”

[link to www.bloomberg.com]

So much for the billions poured into the Banksters coffers it just "ain't" working. Guess the Feds better crank up their money machines will need more and more. Greedy bastards.

Oh if there isn't a very serious second round of bailout then the recession in the US will be longer and harder than it would otherwise be and kerpow, the big deal here are derivatives going pop.

Not sure how close to that we are.

I'd like to reorganize too. Can I just setup a strawman SSN and shuffle all my 'bad paper' to it?