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Banking icon says it expect to sell certain businesses over the next 2 to 3 years. CEO: 'It's all about getting fit.'



NEW YORK (CNNMoney.com) -- Citigroup Inc. said Friday it planned to unload more than $400 billion in assets over the next few years as part of a broader effort by the beleaguered banking icon to reinvigorate itself.

The announcement, which was made during the company's widely anticipated investor and analyst conference, culminates a multi-month review of Citi's different businesses by CEO Vikram Pandit who took office just last December.

Ultimately, Citigroup said it would get rid of roughly $500 billion in so-called legacy assets that currently make up about 22% of the company. Given the current market conditions, the company said it expected to wind down those assets to less than $100 billion over the next two to three years.

The New York-based bank did not name specific divisions it would shed, but said the bulk would come from the Citi's consumer banking and securities divisions. Other units would essentially go into maturity, such as some of the company's real estate assets, said Pandit.

"It's all about getting fit," he said.

Pandit said Friday's announcement represented the first stage of a three-part restructuring process. At the same time, the move fell short of a drastic break-up of the company that some experts speculated was a possibility.

Pandit affirmed that he remained committed to the company's universal bank model, despite calls by critics to break up the firm.

"We believe the right model is a global universal bank," he said. "This is the model that delivers the most shareholder value."

Pandit pushing for change

Since ascending to the throne of CEO following the high-profile departure of Charles Prince, Pandit has attempted to whip into shape what some critics have called the company's bloated corporate structure.

Just this week, Citi and State Street Corp. announced plans to sell CitiStreet, a joint venture by the two firms, for $900 million. Last month, Citi announced the sale of its commercial lending and leasing business to General Electric and plans to get rid of Diners Club International.

The company has also ramped up its cost-cutting efforts. Citi Chief Financial Officer Gary Crittenden said last month that the company planned to cut 9,000 jobs.

On Friday, Crittenden said he expected the restructuring to deliver $15 billion in savings to help boost profitability.

Pandit also took Friday's pow-wow with investors and analysts to provide some guidance about the company's continuing priorities, which include growing Smith Barney, Citigroup's highly profitable wealth management business. At the same time, the Citi CEO stressed that management was focused on shoring up its securities operations by creating a commodity trading business and prime brokerage unit, which typically service hedge fund clients.

"We do have some major product gaps," he said.

With a presence in 106 countries, Citi's management team stressed that it would attempt to leverage its global reach into building the firm.

The company added that it was aiming for 9% revenue growth going forward, after suffering through what has arguably been one of the toughest periods in the firm's 196-year-history.

Citi capped a particularly tough 2007 by posting a $10 billion fourth-quarter loss - the worst ever in its storied history. Citi followed that up last month by recording another staggering loss, this time worth $5.1 billion, for the first quarter of 2008.

Citigroup (C, Fortune 500) stock, which is worth less than half of what it was just a year ago, fell more than 1 percent in afternoon trading on Friday.

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CEO Vikram Pandit has promised to reveal on Friday his strategy for reviving the troubled bank. Will he deliver?
By Carol J. Loomis, senior editor at large


 
Vikram Pandt will focus on Citi's business model when he addresses investors Friday.
New CEOs need to get it right


NEW YORK (Fortune) -- D-Day for Citigroup is Friday - and thank heavens it's finally arrived.

For months, analysts and reporters trying to understand what CEO Vikram Pandit and crew are strategizing to do with this monster financial institution have been told to wait for Investor Day on May 9th, when all will be revealed. In the meantime, information about management's thinking has been doled out sparingly, like wartime rations of sugar.

That doesn't mean news items about Citi have been scarce. Its first quarter loss of $5.1 billion made headlines. Embedded in the loss figure was $14 billion of pretax writedowns, principally for subprime mortgages and leveraged lending. That added to more than $20 billion of writedowns in 2007.

Since banking companies that run losses tend to need capital, Citi has also seemed to be constantly announcing that it has raised some. To the roughly $30 billion it raised last winter, it has recently added more than $10 billion in notes, preferred stock, and common stock. Meanwhile, what Citi hasn't done, to the amazement of many people, is take the obvious capital-conserving step of eliminating its dividend - a move that would be far less expensive than raising capital in the market.

The preservation of the dividend, though, has almost certainly helped the price of Citi (C, Fortune 500) stock, which at $24 is up from $18 a few weeks ago. But $24 is less than half Citi's price a year ago, and it is essential that CEO Pandit convince his audience at Investor Day that he's got a vision that sings.

Certainly Pandit and his crew will talk about the many management changes that have been made - including new executives brought in - and focus on Citi's cost-cutting attempts.

But the main emphasis is apt to be on Citi's business model, which Fortune described in "Can Anyone Run Citigroup?" after interviewing Pandit on April 11th. Pandit said then that Citi would concentrate on four main lines of business - credit cards, wealth management, the corporate bank, and investment banking - and sell off "non-core" operations. Among the recently departed is Citi's North American commercial lending and leasing business, which was sold to GE Capital (GE, Fortune 500).

Pandit also made it adamantly clear that Citi, a sprawling operation that does business in more than 100 countries, would be run as a matrixed organization. That's a management form that leaves many executives reporting to two executives - say, both the head of a geographical region and the head of credit cards. Yes, that can lead to confusion and acrimony, but Pandit says this way of running things is the only method that makes sense.

Tomorrow's Investor Day can be expected to add details to Pandit's plans, bring the world up-to-date on how Citi's risks are being contained and monitored, and generate lots of questions from analysts.

Still, hard talk about progress is likely to be in short supply. In April, talking to Fortune, the company's chief administrative officer, Don Callahan, in fact lamented the fact that Investor Day was coming up so quickly: "If I could have made it any date, I probably would have moved it back to December, where it's been in other years."

By then, said Callahan, management could talk about what had been accomplished, but right now, he said, Citi must talk mostly about "promises." And he said frankly, "I think people are tired of hearing promises."

Callahan's prediction then about the proceedings tomorrow: Pandit will say, "Here's what I've studied, here is what I've come to know, and here is where I think this organization can go in moving forward." That would indeed qualify as "promises," but for sure the audience will be listening very hard.