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Citi, State Street Sell Joint Venture

ING is buying the employee benefits manager CitiStreet for $900 million.

Citigroup

(C) - Get Citigroup Inc. Report

is selling another piece of its sprawling empire, as the bank continues to retool amid mounting writedowns and losses.

The bank and partner

State Street

(STT) - Get State Street Corporation Report

said they are selling their employee benefits joint venture CitiStreet to

ING Group

(ING) - Get ING Groep NV Report

for $900 million in cash. The deal is expected to close in the third quarter.

CitiStreet, which provides recordkeeping, administration and investment services to more than 16,000 retirement plans and 12 million participants, was formed in 2000 between Citi and State Street. Each company owns 50% of the business, which has $262 billion in assets under administration.

"CitiStreet is an industry leader, but retirement plan recordkeeping and administrative services are not strategic priorities for us," Charles Johnston, president of Citi's global wealth management, said in a release. "Smith Barney remains committed to serving corporate and business clients with retirement plans and other institutional offerings and we will work closely with ING and State Street to ensure an orderly transition for clients and employees."

Boston-based State Street says the deal enables the trust and processing bank to "more effectively pursue opportunities that will continue to build on its global franchise focused on servicing institutional investors."

The move further underscores Citi CEO Vikram Pandit's

desire to sell or unwind non-core assets

as the New York-based financial titan struggles to maintain capital levels as the credit crisis and housing downturn continues.

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Pandit has been aggressively repositioning the business and attempting to gain a handle on what many call a unwieldy super-financial conglomerate. The company is reorganizing its businesses to be arranged by geographic location. It has also announced a total of 30,000 job eliminations over the past year or so -- with an additional 9,000 announced last month along with first-quarter earnings results.

The company has also been struggling to boost its capital levels.

Citi, along with

Washington Mutual

(WM) - Get Waste Management, Inc. Report

,

Countrywide Financial

(CFC)

and investment houses like

Merrill Lynch

(MER)

and

Bear Stearns

(BSC)

, have been some of the hardest hit firms over the credit crunch engulfing the market since last summer.

Countrywide agreed in January to be acquired by

Bank of America

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. Bear Stearns agreed in March to be acquired by

JPMorgan Chase

(JPM) - Get JPMorgan Chase & Co. Report

, with substantial help from the

Federal Reserve

.

Citi posted

a loss of $5.1 billion

, or $1.02 a share, for the first quarter, after taking $12 billion in writedowns and an additional $3.1 billion in increased credit costs for the period.

Shares of Citi were up 2.2% to $26.57 in recent trading Friday, while State Street stock was down fractionally.