Citigroup to shed $500 billion in assets in recovery plan

By: Madlen Read, THE ASSOCIATED PRESS

NEW YORK - Citigroup Inc. said Friday it aims to shed about US$500 billion in assets and grow revenue by nine per cent over the next few years, as it tries to rebound from massive losses tied to deterioration in the mortgage and credit markets.

The bank's plans to wind down its $2.2 trillion in assets to approximately $1.7 trillion were part of an investor day presentation.

Citigroup has been under heavy investor scrutiny over the past year as the value of its stock tumbled. Many Citigroup holders have been angling for a large-scale overhaul of the company's structure.

Those shareholders'hopes, however, are dwindling, with executives apparently largely sticking with the bank's current identity.

"We believe the right model is a global universal bank," said Vikram Pandit, who is nearing his five-month anniversary as the chief executive of the financial conglomerate.

Citigroup has written down its assets by some $38 billion since late summer of 2007, built up its reserves to account for future consumer loan defaults, and raised more than $40 billion in cash by selling stakes to outside investors, offering new stock in the markets, and shedding other assets.

Executives have also announced global job cuts amounting to 13,200 so far.

Most analysts believe that while the bulk of the bank's writedowns are through, there are still at least some more to come. In a note Thursday, Deutsche Bank analyst Mike Mayo estimated that Citigroup's $29 billion bucket of mortgage investments and related structured products has the potential to result in another $15 billion writedown.

And given that Citigroup has $63 billion in exposure to home equity loans, $150 billion to mortgages, $21 billion to auto loans, and other exposure to consumer loans such as credit cards, Mayo estimated that the bank will have to build up its reserves by an additional $5 billion.

Amid substantial turmoil in the credit markets, Citigroup generated $13.22 billion in revenue during the first quarter - 48 per cent less than the $25.46 billion it generated during the first three months of 2007.

Citigroup projects revenue growth over the next two to three years to be strongest in its transaction services division, where it is targeting 14 per cent growth. The company believes its global cards business will see the smallest revenue growth, at seven per cent.

It is also aiming for between 16 per cent and 18 per cent return on current equity.

Citigroup shares rose one per cent to $24.55 in early trading Friday. The stock is down 17.5 per cent in 2008 and 55.1 per cent over the last 12 months.