Citigroup Reviews Units for Potential Spin-Offs

Stephen Harris 23 October 2007

Citigroup Reviews Units for Potential Spin-Offs

Citigroup has a mandate to review the group for smaller spin-offs and divestments following a management shakeup and disappointing results, a company source told the Financial Times. Charles Prince’s position as chief executive could also be reviewed at the year-end, potentially triggering a breakup of the banking conglomerate, according to the company source and a shareholder. Citigroup does not have a history of big divestments, noted the company source, but the likeliest candidates would be its insurance and brokerage units, some or all of the advisory or private banking business, and maybe mortgage divisions. Major shareholders believe that Gary Crittenden, who became Citigroup’s chief financial officer in March, can repeat what he did at American Express, where he instigated cost-cutting and spun-off Ameriprise and American Express Financial Advisors. Last month Citigroup created a centralised treasury group, under former head of strategy and M&A, Zion Shohet, that will identify poorer performing units in a bid to allocate capital more efficiently. Mr Prince told analysts that the treasury group was in the process of putting together “a matrix” that would identify products with a low return on risk capital and regulatory capital. Citigroup’s focus is on international growth and applying capital to the fastest growing parts of the business, said the spokesperson. Citigroup’s fast growing businesses are its international bank business, its global wealth management franchise, its global transaction services, its advisory business, and its international consumer business. Investor pressure on top level management intensified after Citigroup reported a 57 per cent decline in third quarter net income driven by lower revenues in fixed income and higher consumer credit costs. Mr Prince has the board’s backing but his position will be reviewed at year end, the company source said.

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