Citi to split itself into two; posts USD 8.29 bn Q4 losses

Citigroup will be splitting itself into two businesses even as the financial colossus slipped deeper into the red, posting losses for the fifth straight quarter.

The company which posted more than eight-billion-dollar loss for the December quarter said in statement, "Today, we announced that we would separate the company, for management purposes, into two separate businesses Citicorp and Citi Holdings."

Hit by writedowns and losses in securities and banking verticals, higher credit losses and restructuring costs, the Vikram Pandit-led Citi on Friday posted a loss of 8.29 billion dollars in the fourth quarter.

The company had a loss of 9.83 billion dollars in the year-ago period.

Following the split, traditional banking businesses would be held under Citicorp, while other riskier assets would come under Citi Holdings.

The banking major had revenues to the tune of 5.59 billion dollars for the December quarter, against 6.42 billion dollars in the corresponding period a year earlier.

"Results reflect the negative impact from 7.8 billion dollars in revenue marks in securities and banking, a 5.3- billion dollar downward credit value adjustment on derivative positions, excluding monolines."

The firm also had a "2.5 billion dollar of losses in private equity and equity investments, 2 billion dollar of restructuring costs, and a 6 billion dollar net loan loss reserve build," the  statement added. 

For the fourth quarter, Citi had the highest losses in the North American region to the tune of 11.02 billion dollars, while losses in Asia stood at 371 million dollars and in Europe, Middle East and Africa at 332 million dollars.

"Our results continued to be depressed by an unprecedented dislocation in the capital markets and a weak economy," Pandit said, adding that in 2008, "Citi made significant progress in reducing risk from our balance sheet".

"Our legacy assets declined to approximately 300 billion dollars, over 300 billion dollars of assets are now covered by a loss sharing arrangement, and we added 14 billion dollars to our loan loss reserves," he noted.

For the year, Citi reported a a net loss of 18.72 billion dollars on revenues of 52.8 billion dollars.

The company said since the third quarter of 2008, about 29,000 employees were given the pink slip. Further, nearly 52,000 jobs were cut globally last year.

Pandit said despite "unprecedented turbulence in the global financial markets," Citi employees have conducted themselves with the highest professionalism and integrity.

"... we will emerge from the current environment stronger, smarter, and better positioned to realise the full earnings power of this great franchise," he added.

Meanwhile Citi has received two lifelines from the Federal government worth USD 45 billion in addition to receiving guarantees for toxic assets worth over 300 billion dollars.

On January 13, Citi had said it would combine the retail brokerage operations Smith Barney with the wealth management business of Morgan Stanley. In the joint venture Morgan Stanley Smith Barney, Citi would exchange Smith Barney for a 49 per cent stake in the joint venture Morgan Stanley Smith Barney and a USD 2.7 billion cash payment.

The deal is expected to result in a pre-tax gain of USD 9.5 billion for Citi.