what was the idea behind Citigroup's splitting up into two different divisions? what does this do for citigroup? thanks.
Good Answers (6)
Among the businesses being moved into the “non-core category of Citi Holdings are the CitiFinancial consumer-lending business and Primerica Financial Services life-insurance unit. The company’s core businesses, to be grouped under Citicorp, will include branch banking, corporate lending, transaction processing and securities underwriting and handling trades for clients.
This doesn't change the Citi's business model in short term. It moves the peripheral business into a separate place. But it allows Citi to value the good business better in the market and hence to raise cash for it. Also in the long run, it allows to sell the peripheral business which is hard to value right now.
Ajay W.
Project and Business advisory services.
Best Answers in: Equity Markets (2), Regulation and Compliance (1), Change Management (1), Currency Markets (1), Hedge Funds (1), Project Management (1), Wealth Management (1)
Citibank is giving up it's universal bank business model and shedding it's unprofitable assets and business lines. It is trying to salvage it's core profitable business lines and segregating the troubled assets and eventually spin them off as markets stabilize.
The hope here is to ensure survival of the Citibank core business and to focus on it's core competencies and the businesses that management sees as being critical to it's continuance as a profitable entity.
Frank F.
►CEO/Bd Director ►IT Governance Advisor ►Future-Proof Strategy ►Keynotes ►Inno-Change ►Social Media Mktg ►China Advisor
Best Answers in: Using LinkedIn (276), Organizational Development (102), Change Management (81), Government Policy (48), Economics (30), Staffing and Recruiting (29), Corporate Governance (29), Career Management (28), Ethics (26), Equity Markets (24), Business Development (21), Planning (21), Mentoring (20), Business Analytics (17), Communication and Public Speaking (17), Education and Schools (15), Internationalization and Localization (15), Personnel Policies (14), Web Development (14), Small Business (12), Energy and Development (12), Job Search (11), Internet Marketing (11), Financial Regulation (10), Advertising (10), Professional Networking (10), Project Management (9), E-Commerce (9), Compensation and Benefits (8), Sales Techniques (8), Writing and Editing (8), Manufacturing (8), Computers and Software (8), International Law (7), Starting Up (7), Blogging (7), Accounting (6), Quality Management and Standards (6), Government Services (5), Work-life Balance (5), Offshoring and Outsourcing (5), Lead Generation (5), Software Development (5), Customer Service (4), Health Care (4), Treaties, Agreements and Organizations (4), Search Marketing (4), Nonprofit Management (4), Philanthropy (4), Social Enterpreneurship (4), Branding (4), Market Research and Definition (4), Business Plans (4), Biotech (4), Facilities Management (3), Certification and Licenses (3), Occupational Training (3), Conference Planning (3), Risk Management (3), Public Health and Safety (3), Exporting/Importing (3), Contracts (3), Employment and Labor Law (3), Guerrilla Marketing (3), Viral Marketing (3), Public Relations (3), Customer Relationship Management (3), Labor Relations (3), Currency Markets (3), Derivatives Markets (3), Futures Markets (3), Nonprofit Fundraising (3), Inventory Management (3), Personal Debt Management (3), Wealth Management (3), Product Design (3), Green Products (3), Enterprise Software (3), Telecommunications (3), Regulation and Compliance (2), Car and Train Travel (2), Freelancing and Contracting (2), Event Marketing and Promotions (2), Public Funding (2), Criminal Law (2), Corporate Law (2), Property Law (2), Direct Marketing (2), Graphic Design (2), Bond Markets (2), Commodity Markets (2), Packaging and Labeling (2), Supply Chain Management (2), Personal Investing (2), Personal Real Estate (2), Distribution (2), Professional Books and Resources (2), Incorporation (2), Green Business (2), Air Travel (1), Business Dining and Entertainment (1), Travel Tools (1), Resume Writing (1), Conference Venues (1), Budgeting (1), Foreign Investment (1), Mergers and Acquisitions (1), Government Contracts (1), Environmental Health (1), Antitrust Law (1), Finance and Securities Law (1), Events Marketing (1), Mobile Marketing (1), Hedge Funds (1), Option Markets (1), Individual Insurance (1), Industrial Design (1), Pricing (1), Positioning (1), Information Storage (1)
The bank is a basket case and could totally implode. I see this as a final desperation measure to salvage part of it, probably by doing some creative accounting to purge one part of its toxic assets. Then the other "bad" bank will be allowed to fail.
James C B.
JCB Capital Performance - Personal Wealth Management, Asset Manager, Financial Planner, Wealth Adviser
Best Answers in: Economics (64), Equity Markets (47), Currency Markets (31), Financial Regulation (24), Personal Investing (22), Commodity Markets (20), Derivatives Markets (16), Bond Markets (15), Government Policy (14), Wealth Management (11), Risk Management (10), Futures Markets (9), Option Markets (9), Retirement and Estate Planning (9), Accounting (8), Hedge Funds (7), Venture Capital and Private Equity (4), Individual Insurance (4), Personal Taxes (4), Personal Real Estate (4), Budgeting (3), Mergers and Acquisitions (3), International Law (3), IPO (2), Internationalization and Localization (2), Manufacturing (2), Career Management (2), Energy and Development (2), Education and Schools (1), Auditing (1), Corporate Debt (1), Foreign Investment (1), Corporate Taxes (1), Government Contracts (1), Compensation and Benefits (1), Staffing and Recruiting (1), Work-life Balance (1), Exporting/Importing (1), Offshoring and Outsourcing (1), Corporate Law (1), Finance and Securities Law (1), Business Development (1), Business Analytics (1), Corporate Governance (1), Change Management (1), Nonprofit Management (1), Philanthropy (1), Project Management (1), Supply Chain Management (1), Personal Debt Management (1), Ethics (1), E-Commerce (1), Computers and Software (1)
Hi Alex,
Good bank - Bad Bank. Citigroup to split between - Citicorp: retail, corporate, investment and private banking, credit card businesses and Citi Holdings: brokerage, asset management, CitiFinancial and CitiMortgage.
Citigroup is facing huge losses from exposure to mortgage-backed assets (CDO / CDSs). Consequently, it is faced with reorganization.
EESA / TARP invests $25 billion in Citigroup with preferred stock (5% dividend for the first 5% years and then convert to 9%), warrants (right to buy common stock equal to 15% of the total investment in the firm) and compensation limitations.
Citigroup receives $20 billion (in addition to the initial $25 billion) from TARP to protect $306 billion of troubled mortgages and assets - Citigroup assumes losses on the first $29 billion the Treasury will absorb 90% of the remaining losses and $27 billion of preferred with an 8% dividend.
Morgan Stanley agrees to buy 51% of Citigroup’s Smith Barney for $2.7 billion.
Citigroup will modify 500,000 borrower's mortgages.
Average bank customer (under FDIC limit of $250k) will see little change.
JC Brandon
Links:
James D.
President at Flatiron Solutions, Inc.
Best Answers in: Offshoring and Outsourcing (1), Business Development (1), Business Plans (1), Enterprise Software (1), Software Development (1)
Here is one possible outcome of a real split up of Citigroup (NYSE: C). A snapshot would be taken of Citigroup at some point in time. C would then be split into two entities with their own stock symbols; C1 (Citicorp - less risk) and C2 (Citi Holdings - more risk). Shareholders of C would then be given shares in both C1 and C2, which would then trade based on their own relative performance and merits. One advantage to Citigroup would seem to be that the whole organization would longer trade based on performance, perceptions and news relating to what would become C2.
Lynn W.
virtualization since Jan68, online at home since Mar70
Best Answers in: Financial Regulation (5), Information Security (5), Economics (4), Government Policy (3), Equity Markets (3), Risk Management (2), Blogging (2), Enterprise Software (2), Budgeting (1), Mergers and Acquisitions (1), Sales Techniques (1), Planning (1), Bond Markets (1), Derivatives Markets (1), Hedge Funds (1), Career Management (1), Computer Networking (1), Information Storage (1), Telecommunications (1), Web Development (1)
Citigroup’s Pandit Tries to Save the Little That’s Left to Lose
http://www.bloomberg.com/apps/news?pid=20601087&sid=aN81uQ4nU4e8&refer=home
Bury The Legacy Of Sandy Weill...
http://www.forbes.com/opinions/2009/01/14/citigroup-weill-summers-oped-cx_rs_0114smith.html
related PBS program ... that included looking how it was
put together along with the repeal of Glass-Steagall
http://www.pbs.org/wgbh/pages/frontline/shows/wallstreet/
long-winded, decade old post that discussed some of the issues
http://www.garlic.com/~lynn/aepay3.htm#riskm
Links:
- http://www.bloomberg.com/apps/news?pid=20601087&sid=aN81uQ4nU4e8&refer=home
- http://www.forbes.com/opinions/2009/01/14/citigroup-weill-summers-oped-cx_r...
- http://www.pbs.org/wgbh/pages/frontline/shows/wallstreet/
Clarification added January 19, 2009:
A year ago there was betting that citi was going to "win" the bank "write-down sweepstakes (i.e. declare the largest losses). This refers to even after citi had won the "write-down" sweepstakes for assets on their books ... citi still had $1.1T of toxic assets carried off-balance.
http://www.forbes.com/entrepreneursfinance/2007/11/13/citigroup-suntrust-siv-ent-fin-cx_bh_1113hamiltonmatch.html
and
http://www.nakedcapitalism.com/2008/07/wither-citigroups-11-trillion-of-off.html?showComment=1216055460000
and would eventually have to come back on the balance sheet (and the associated losses declared).
Clarification added January 23, 2009:
part of citi's problems appears to be trying to decide when/how to bring the $1.1T in toxic assets back on to the balance sheet (and how to value them for declaring the associated losses) ... recent somewhat related article:
Roubini Predicts U.S. Losses May Reach $3.6 Trillion
http://www.bloomberg.com/apps/news?pid=20601087&sid=aS0yBnMR3USk&refer=home
from above:
U.S. financial losses from the credit crisis may reach $3.6 trillion, suggesting the banking system is "effectively insolvent," said New York University Professor Nouriel Roubini, who predicted last year's economic crisis.
... snip ...
couple recent posts mentioning above:
http://www.garlic.com/~lynn/2009b.html#1 Are Both The U.S. & UK on the brink of debt disaster?
http://www.garlic.com/~lynn/2009b.html#8 Do emperors from the banks have new clothes?
