Citigroup to split after further losses

By John Hill on January 16, 2009 2:19 PM |

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Citigroup is to split into two units as it bids to bounce back from fourth quarter losses of $8.29billion.

The results are the US bank's worst since the credit crunch began, and were revealed as the US Senate voted to release the remaining $350billion of the country's bail-out fund.

Citigroup will assign all of its client-facing units to Citicorp, including its retail and investment banking sectors, while Citi Holdings will assume control of the troubled assets of the bank. These include the Smith Barney brokerage unit, which was merged with Morgan Stanley's brokerage operation last week.

Chief executive Vikram Pandit said: "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, which will enable us to better serve our clients and customers in both businesses without disruption.

"In light of the opportunities we see in the market today, we believe this new structure will provide a wide range of options going forward to continue strengthening our core franchise."

Concern about the state of the financial giant has grown in recent months, with shares plummeting to a 16-year low as the results were announced.

The company has already received the biggest bail-out of the credit crunch so far, with the treasury stumping up $20billion and guaranteeing losses of up to $306billion in November. But it posted its fifth straight quarterly loss this week, leaving it with a net loss of $18.72billion in 2008.

Citigroup announced last week it was merging its Smith Barney brokerage unit with Morgan Stanley following pressure from the US government to raise capital. The deal will free up £1.85billion in exchange for the transfer of a 51 per cent stake to Morgan Stanley.

It is not currently applying for a share of the second $350billion of the US government's bail-out fund, which was released by the senate following a 52-42 vote.