Citi Shake-Up Could Signal Asset Sales

Citigroup'sC decision to separate its consumer credit card and retail banking arms could be a first sign that the beleaguered banking titan is preparing to undertake a long-called-for paring of its business.

The New York-based bank, soiled by securities writedowns and forced to take billions in provisions for mortgage loan losses, formally announced Monday a new corporate organizational structure in which its business lines will be combined and reported by geographic location. The company is also splitting its consumer banking and credit card divisions into two separate units.

Proponents of the changes say that they will enable CEO Vikram Pandit to get a better grip on improving performance at some of the more troubled areas of the firm, notably its credit card and retail banking businesses, after years of underperformance. And while Citi declined to comment on speculation, it's possible that Pandit could also be paving the way for an eventual sale or spinoff of one or more individual businesses, as the changes break Citi into more manageable pieces.

News You Need: Citigroup, JPMorgan Chase

Some critics of Citi have been calling for a breakup of the financial giant, particularly in the wake of the subprime mortgage meltdown and ongoing credit crunch. Ex-CEO Sandy Weill built the financial supermarket a decade ago, but Citi shares have really taken a beating since last summer, when a global credit crunch forced billions in writedowns from it and from major Wall Street firms such as Merrill LynchMER and UBSUBS.

The writedowns at Citi led to the ouster of Weill's handpicked successor as CEO, Charles Prince, in November and Pandit's ascension in December. And when Pandit first spoke to analysts as CEO, he suggested organizational changes and said the potential sale of assets were a possibility.

"I will undertake an objective and dispassionate review of all the businesses individually and in aggregate," Pandit said on the December call.

On Monday, Pandit hailed the changes the bank was making as a way to make "a simpler, leaner and more efficient organization that works collaboratively across the businesses and throughout the world." The changes include realigning businesses along geographic lines in Asia, the Middle East, Europe and Latin America, while consolidating U.S. and international credit cards under one roof and U.S. consumer banking under another. All of the divisions would report directly to Pandit.

"With this new structure, we reinforce our focus on clients by moving the decision-making process as close to clients as possible and assigning some of our strongest talent to lead the regional areas and global product groups," Pandit said.

Tim Ghriskey, chief investment officer at Solaris Asset Management, acknowledged that the realignment announced Tuesday does "position [Citi] theoretically for an easier sale" of certain businesses.

Still Ghriskey, whose firm does not own shares of Citi, and others agree that while a sale or spinoff could be coming in the future, Citi's first order of business is to improve those units that are not pulling their own weight. Additionally, the generally poor banking environment makes looking for a buyer even more difficult.