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is slowly and steadily unwinding Citigroup Holdings, but the so-called bad bank that holds many of the firms non-core assets still continues to be a drag on the balance sheet.

The bank reported

a first quarter net income of $3 billion, or 10 cents per share

. Citi Holdings revenues declined 50 percent from last year to $3.3 billion. Net interest revenues fell by over 40 percent due to lower consumer lending. Net losses for Citi Holdings was $608 million compared to $886 million in the first quarter of 2010.

"Citi Holdings will be a drain on our revenue for a while. Eventually, growth in Citi Corp will overtake the growth in Citi Holdings," said CEO Vikram Pandit on the first quarter earning conference call.

Citigroup was able to divest $22 billion in assets in the first quarter, leaving total assets in the entity at $337 billion.

"Citi Holdings assets are now at 17% of our total balance sheet," said Pandit. "Citi Holdings' loss was $608 million, down 31% from the prior year."

Last quarter, Citigroup divested $106 billion in asset sales, and $49 billion in net run-off and amortization. Of those asset sales, $10 billion came from Citi's mortgage books with $6 billion being delinquent loans.

"The assets in Citi Holdings will continue to decline," said John Gerspach, CFO, on the first quarter earnings conference call. "However as you can see those will be moderated over the next year."

Pandit and Gerspach also stated that the company was in the process of weighing final bids for CitiFinancial, which has reportedly drawn interest from private equity firms. The bank is also looking to sell more private equity investments in Japan and expects to divest more mortgage assets over the coming year.

-- Written by Maria Woehr in New York.

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