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| Version 2 | Version 3 |
|---|---|
| Citigroup to split as losses grow | Citigroup to split as losses grow |
| (about 2 hours later) | |
| Struggling US banking giant Citigroup has announced plans to split the firm in two, as it reported a quarterly loss of $8.29bn (£5.6bn). | Struggling US banking giant Citigroup has announced plans to split the firm in two, as it reported a quarterly loss of $8.29bn (£5.6bn). |
| It said it would realign into two new firms, Citicorp and Citi Holdings. | It said it would realign into two new firms, Citicorp and Citi Holdings. |
| Citicorp will handle the company's traditional banking work, while Citi Holdings will take on the firm's riskiest investment assets. | Citicorp will handle the company's traditional banking work, while Citi Holdings will take on the firm's riskiest investment assets. |
| Last autumn, Citigroup had to be rescued by the US government in a bail-out deal totalling $45bn. | Last autumn, Citigroup had to be rescued by the US government in a bail-out deal totalling $45bn. |
| The government also agreed to guarantee up to $306bn (£205bn) of risky loans and securities on Citigroup's books. | The government also agreed to guarantee up to $306bn (£205bn) of risky loans and securities on Citigroup's books. |
| 'Ongoing efforts' | 'Ongoing efforts' |
| "Given the economic and market environment, we have decided to accelerate the implementation of our strategy to focus on our core businesses," said Citigroup chief executive Vikram Pandit. | "Given the economic and market environment, we have decided to accelerate the implementation of our strategy to focus on our core businesses," said Citigroup chief executive Vikram Pandit. |
| I'm surprised it's this bad Matt McCormick, Bahl & Gaynor Investment Counsel | I'm surprised it's this bad Matt McCormick, Bahl & Gaynor Investment Counsel |
| "This will help in our ongoing efforts to reduce our balance sheet and simplify our organisation. | "This will help in our ongoing efforts to reduce our balance sheet and simplify our organisation. |
| "We are setting out a clear roadmap to restore profitability." | "We are setting out a clear roadmap to restore profitability." |
| Citigroup's net loss for the last three months of 2008 works out at $1.72 per share, worse than analyst expectations of $1.31. | Citigroup's net loss for the last three months of 2008 works out at $1.72 per share, worse than analyst expectations of $1.31. |
| Its quarterly revenues were down 13% to $5.6bn, which Citigroup said reflected "the impact of a difficult economic environment and weak capital markets". | Its quarterly revenues were down 13% to $5.6bn, which Citigroup said reflected "the impact of a difficult economic environment and weak capital markets". |
| "I think people knew it was going to be bad, but I'm surprised it's this bad," said Matt McCormick, portfolio manager at Bahl & Gaynor Investment Counsel in Cincinnati. | "I think people knew it was going to be bad, but I'm surprised it's this bad," said Matt McCormick, portfolio manager at Bahl & Gaynor Investment Counsel in Cincinnati. |
| Good and bad | Good and bad |
| Analysts say the split essentially puts Citigroup's solid and profitable consumer banking interests in the hands of the new Citicorp, while the bad investment debts that forced it to seek government help go into Citi Holdings. | Analysts say the split essentially puts Citigroup's solid and profitable consumer banking interests in the hands of the new Citicorp, while the bad investment debts that forced it to seek government help go into Citi Holdings. |
| CITIGROUP SPLIT Citicorp - to have responsibility for universal banking operationsCiti Holdings - to take on the firm's brokerage and investment interests, and a special pool of loss-making assets class="" href="/1/hi/business/7746077.stm">The rise and fall of Citigroup | |
| This will enable Citicorp to return to profitability much quicker than would have been possible for Citigroup as a single firm. | This will enable Citicorp to return to profitability much quicker than would have been possible for Citigroup as a single firm. |
| Meanwhile, the bosses at Citi Holdings will have the arduous task of sorting through the mass of bad debt, picking out what can be salvaged. | Meanwhile, the bosses at Citi Holdings will have the arduous task of sorting through the mass of bad debt, picking out what can be salvaged. |
| Citigroup said it was now looking for a "strong manager" to head Citi Holdings. | Citigroup said it was now looking for a "strong manager" to head Citi Holdings. |
| Redundancies | Redundancies |
| For 2008 as a whole, the bank made a net loss of $18.72bn. | For 2008 as a whole, the bank made a net loss of $18.72bn. |
| Mr Pandit says he is confident the two new firms can be successful | Mr Pandit says he is confident the two new firms can be successful |
| It blamed the losses on having to write-off bad debt and the cost of making redundancies. | It blamed the losses on having to write-off bad debt and the cost of making redundancies. |
| The firm cut 52,000 jobs last year as its losses mounted against the backdrop of the sharp downturn in the US mortgage market and the resulting global credit crunch. | The firm cut 52,000 jobs last year as its losses mounted against the backdrop of the sharp downturn in the US mortgage market and the resulting global credit crunch. |
| "We are committed to helping the financial markets recover as quickly as possible," added Mr Pandit. | "We are committed to helping the financial markets recover as quickly as possible," added Mr Pandit. |
| The firm added that it also expected further departures from its board of directors. | The firm added that it also expected further departures from its board of directors. |
| It was announced last week that director Robert Rubin, a former US Treasury Secretary is to leave the firm. | It was announced last week that director Robert Rubin, a former US Treasury Secretary is to leave the firm. |
| Bank of America | Bank of America |
| Citigroup's announcement comes after news that rival Bank of America is to receive $20bn in fresh US government aid and $118bn worth of guarantees against bad assets. | Citigroup's announcement comes after news that rival Bank of America is to receive $20bn in fresh US government aid and $118bn worth of guarantees against bad assets. |
| The emergency funding will help the troubled bank - the US's largest - absorb the losses it incurred when it bought Merrill Lynch. | The emergency funding will help the troubled bank - the US's largest - absorb the losses it incurred when it bought Merrill Lynch. |
| Bank of America has already received $25bn in capital injections from the Troubled Assets Relief Programme, known as Tarp, the bail-out fund designed to rescue banks reeling from the financial crisis. | Bank of America has already received $25bn in capital injections from the Troubled Assets Relief Programme, known as Tarp, the bail-out fund designed to rescue banks reeling from the financial crisis. |
| In another development, the Irish government has said it is to nationalise the Anglo Irish Bank after its funding problems continued. | In another development, the Irish government has said it is to nationalise the Anglo Irish Bank after its funding problems continued. |