Posted on 16 Jan 2009
Citigroup Inc. posted an $8.29 billion loss, twice as much as analysts estimated, and said it will split in two under Chief Executive Officer Vikram Pandit’s plan to rebuild a capital base eroded by the credit crisis.
Citigroup rose 4 percent in New York trading after tumbling 43 percent this year through yesterday. Pandit will undo the legacy of former CEO Sanford “Sandy” Weill by creating Citicorp to house the New York-based company’s global bank, and Citi Holdings, for “non-core” assets, including those guaranteed by the U.S. government.
“The financial supermarket was buried today,” said Bill Smith, founder of Citigroup shareholder Smith Asset Management Inc. in New York, who has repeatedly called for a breakup.
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 and insurance 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.
Citigroup’s lead independent director, Richard Parsons, said today in a statement that the bank also plans to shake up its board of directors. He didn’t provide details.