Citi sells brokerage as it heads for break up

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The Independent Online

Citigroup will bring forward to tomorrow the release of fourth-quarter results that are widely expected to confirm a haemorrhaging of cash that is forcing its chief executive Vikram Pandit to begin the painful process of dismantling the bank to save it from ultimate collapse.

With little sign that the carnage stemming partly from the credit crisis has been contained, the dismemberment of Citigroup seems inevitable after its management confirmed rumours that it had agreed to surrender control of its Smith Barney brokerage operations in a joint venture with Morgan Stanley.

As Citigroup shares fell by almost 14 per cent in early trading in New York, the only question seemed to be how quickly Mr Pandit would have to shed parts of the Citigroup empire to satisfy both investors and the US government, which last year stepped in twice to pull the bank back from the brink.

"I think within 12 months, Citigroup no longer exists," commented William Smith, of Smith Asset Management, which owns Citigroup shares. Mr Smith has been one of the loudest critics of the bank on Wall Street, faulting it for poor management and for failing to properly integrate its many parts.

Originally scheduled for release next Wednesday, the fourth-quarter numbers are widely expected to show the bank lost an additional $2.6bn (£1.8bn). Some analysts warn that the losses in 2009 may total more than $12bn.

With the agreement to put Smith Barney under the roof of Morgan Stanley, the experiment of turning Citigroup into what was meant to be world's first global financial supermarket, where customers could buy any conceivable product from investment banking to insurance and credit cards, may already over.

Mr Pandit is believed to be considering jettisoning Citigroup's private label credit card business and two consumer-finance units. He may also order a severe cut-back in the trading the bank does on its own behalf. Not thought to be at risk, however, are parts of the bank dealing with mergers and acquisitions, corporate lending or indeed retail consumer banking.

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