Citigroup will consider selling around $400 billion of non-core assets as part of a plan to slash costs and reinvigorate profit growth, according to a report in the Financial Times citing people familiar with the situation. The newspaper said CEO Vikram Pandit is likely to tell an analyst meeting that around 20 percent of Citigroup's $2 trillion balance sheet consists of legacy positions, including entire businesses and trading positions outside its core focus of commercial, consumer and investment banking. Selling the assets will take years and some may never be sold, the report said. It added Pandit will use the meeting to confirm plans to cut Citigroup's $60 billion cost base by 20 percent, but will reject calls to break up the bank. Since becoming chief executive in December, Pandit has been clearing out the corporate attic of weak businesses and unloading worrisome assets at bargain-basement prices. Trying to streamline the company and placate restive shareholders, Pandit has sold or closed more than 45 branches in eight states. He has also unloaded Citigroup's headquarters building in Tokyo and its investment-banking base in New York and ditched more than $12.5 billion in loans used to finance corporate buyouts. And he has jettisoned the Diners Club credit card franchise, commercial leasing divisions and a big pension administration unit. Pandit is not done yet. After months of false starts, Citigroup is trying to sell Primerica Financial, a life insurance and mutual fund company, according to people close to the situation. He is also looking to sell Citigroup's back-office outsourcing unit in India and its Smith Barney brokerage firm in Australia. Some speculate that he may also try to sell 340 bank branches in Germany, possibly to Deutsche Bank. Put together, all these sales could raise billions of dollars for Citigroup at a time the bank is feverishly raising capital. Yet the moves also reflect a crucial shift in how Pandit plans to run the bank. Pandit was to lay out his vision on Friday in his first major presentation to investors and Wall Street analysts. Pandit is intent on keeping Citigroup together, rather than carving it up, as some investors are urging. But in a break from the financial supermarket model championed by Sanford Weill, who built Citigroup through acquisitions in the late 1990s, Pandit plans to focus on businesses and regions where Citigroup can generate the fattest returns. At the same time, Pandit vows to “break apart the culture” and demand better performance. To do so, he has brought in executives and overhauled compensation so his managers have incentives to focus on what is best for the entire company, rather than their own corner of it. “If it's only thinking about my profits and losses, I'm going to hold that person accountable,” Pandit said in a recent interview. Some Citigroup bankers complain that Pandit has failed to communicate his vision, especially for the consumer-banking businesses, which account for more than half of the bank's profit. Decisions, they say, often get bogged down by internal politics and a new top-down hierarchy. (Insiders say power rests with Pandit and a core group of top advisers, nicknamed the G-5, something Pandit strongly denies.) Overhauling Citigroup will be a long slog, and Friday's presentation will show how forthright Pandit will be about the challenges ahead. It took more than three years before big rivals like JPMorgan Chase and Wells Fargo saw similar efforts start to pay off. And those companies, unlike Citigroup, had the benefit of proven managers and a flush economy. Pandit, by contrast, is embarking on this course after Citigroup suffered more than $40 billion in write-offs and is likely to absorb billions more. That will eat away at the money he can invest to fuel the company's future growth. The clock is ticking. Citigroup's chief financial officer, Gary Crittenden, said in a recent interview that selling sideline businesses is one way that Citigroup hopes to plug the holes in its balance sheet. Profit will be allocated to faster-growing businesses, including many overseas. “There is no particular urgency to sell any particular asset,” Crittenden said. “These are good businesses that are for sale, and we want to work with buyers who see them as a strategic fit.” Citigroup has been down this road before. And the last time, things did not end well. In July 2004, Prince announced that the bank would hold a “garage sale” to sell businesses. Citigroup sold its Travelers Life and Annuity business and asset management arm, as well as part of its commercial leasing operations. It also quietly sold stakes in banks in Taiwan and Saudi Arabia, and the Nikko Cordial brokerage firm in Japan.
