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Citigroup posts loss, splits up the bank

Financial Law     updated  2009/01/16 07:17


Citigroup said Friday it is splitting into two businesses as it reported a fourth-quarter net loss of $8.29 billion -- its fifth straight quarterly loss.


In Citigroup's reorganization, one business, Citicorp, will focus on traditional banking around the world, while the other, Citi Holdings, will hold the company's riskier assets.

CEO Vikram Pandit's move will allow Citigroup to sell or spin off the Citi Holdings assets to raise cash. It also reveals the company's growing focus on back-to-basics lending and deposit-gathering, and dismantles the "financial supermarket" created a decade ago.

Shares rose about 4 percent in pre-market trading.

Some investors have been calling for a breakup of Citigroup for years, as the bank struggled to keep up with its Wall Street peers. Those calls grew louder as the mortgage crisis caused the company's troubles to mount.

There has been harsh blame for Citigroup's woes directed at the board, too -- and the company said Friday it plans to get rid of more board members after the recent departure of long-time director and former Treasury Secretary Robert Rubin.

"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.

The New York-based bank's fourth-quarter loss amounted to $1.72 per share. Analysts expected a loss of $1.31 per share. While the per-share loss was higher than the consensus estimate, the total loss was smaller than the $10 billion many investors feared. For the year-ago fourth quarter, Citigroup had a net loss of $9.83 billion, or $1.99 per share.


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