Citigroup brings $49bn SIVs on to balance sheet

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Citigroup said last night it is to bail out its seven structured investment vehicles (SIVs), bringing $49bn of assets on to its balance sheet in the biggest move yet by a bank to rescue the failing funds.

The largest US bank said it had succeeded in cutting the SIVs assets, net of cash and cash equivalents, to $49bn from $87bn in August, while maintaining the portfolio's credit quality.

The late night announcement threw into doubt the future of a Citigroup-led rescue plan for the SIV industry, which had attracted little support.

It came after Vikram Pandit, the newly appointed head of Citi-group, moved quickly to stamp his mark on the ailing banking giant, parting company with bank veteran Bob Druskin, currently the chief operating officer. Mr Druskin had been masterminding a cost-cutting drive that would axe 17,000 employees, but Mr Pandit has signalled he will pursue even more vigorous measures and may even sell large parts of the business.

As Citigroup employees braced for further changes, Mr Pandit told them that Gary Crittenden, the chief financial officer, will lead "a company-wide review of our structure and expense base to ensure that we operate as efficiently as possible".

Mr Druskin, 60, has been with Citigroup or its predecessor companies for 16 years and had been a loyal lieutenant to Chuck Prince, the former chief executive who was ousted last month after multi-billion dollar losses from the credit crisis. He had been chief operating officer for a year, having previously headed the investment banking arm of the group. Announcing his retirement, Mr Druskin said: "Though there is never a perfect time to move on, with the company entering an important next phase now seems right to me."

In India, the extended Pandit family has been celebrating the remarkable rise of the man who, as a child, was too shy to talk to anyone outside his immediate family. "Do not write too much," Mr Pandit's father, Shankar, told a reporter from the Indian Express newspaper. "Just tell them that he's a good boy." Mr Pandit, who was brought in to Citigroup this year when the company bought his hedge fund business, won the top job despite concerns that he had not run a public company before or had any experience on the retail banking side of the business.

Mr Pandit Snr said he had discussed the issue with his son before the announcement, and asked him what he thought of his chances. He apparently told his 85-year-old father: "I know it's me. The board is only taking time to make the right decision."