The Citigroup Empire Dismantles

One year ago, I wrote: “In the end, I expect Citigroup will be broken into pieces and eventually be a shell of its former self.” Today we learn that the company is finally taking my advice:

“Citigroup Inc.’s chief executive officer said yesterday he would cede control of the Smith Barney brokerage to Morgan Stanley. Pandit may also dump the CitiFinancial consumer-lending unit, tag Tokyo-based Nikko Asset Management Co. for eventual sale and rein in trading with the bank’s own capital, people familiar with the matter said.

“Pandit, who turns 52 today, spent 13 months on the job trying to integrate a New York-based behemoth assembled by predecessors Sanford “Sandy” Weill and Charles O. “Chuck” Prince. Yet he incurred $20 billion of net losses and was forced to accept $45 billion of rescue funds from the U.S. government. Now, he’s slicing off divisions of a company he described six months ago as “a truly global universal bank.”

“The financial-supermarket model “was never going to work,” said Bill Smith, founder of Citigroup shareholder Smith Asset Management Inc. in New York, who has repeatedly called for a breakup. “You had three management teams that all failed to integrate this. You will not recognize this company within 12 months.”

“The bank’s remaining parts will include branch banking, advising on mergers, underwriting securities, processing payments, corporate lending and handling trades for clients, the people said. Citigroup will keep its international reach, maintaining the “globality” that Pandit said last year was the bank’s defining strength. Pandit wasn’t available to comment.”

When I wrote last year’s post, shares of Citigroup (C) were going for $27. Today the stock is about $5.

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