Los problemas del Citi

Worries over Citigroup mount

Wed Jan 14, 10:30 am ET

NEW YORK (Reuters) – Citigroup Inc shares tumbled Wednesday as investors and analysts worried about whether the bank can be profitable and function effectively as it unravels its business model.

The bank on Wednesday said it will report fourth-quarter results on January 16, six days earlier than originally planned. It is expected to post a multibillion-dollar loss.

Rival JPMorgan Chase & Co also moved up its earnings release six days and is due to report on Thursday.

Once the world's largest bank, Citigroup is expected to shrink by about a third as it focuses on corporate, investment and retail banking and trims its trading operations, a person familiar with the plan said.

Citigroup will also put businesses and assets it no longer wants into a separate structure with an eye toward eventual sales, the person said.

The disposals will mark an about-face for Chief Executive Vikram Pandit, who had endorsed retaining large parts of the "financial supermarket" created by former CEO Sanford "Sandy" Weill, who created Citigroup in a 1998 merger.

A drumbeat of analysts and investors has questioned whether Citigroup or market developments will give Pandit, who became chief executive in December 2007, time to finish the job.

Citigroup has received two lifelines from the U.S. Treasury Department's Troubled Asset Relief Program, getting $25 billion in October and $20 billion in November. The second infusion involved an agreement by the government to share in some losses, in exchange for preferred stock and warrants.

On Tuesday, Citigroup announced plans to combine its Smith Barney brokerage and other businesses with Morgan Stanley's wealth management unit, bolstering capital.

Morgan Stanley will pay $2.7 billion to Citigroup and take a 51 percent stake in the joint venture, with the ability to buy all of it after five years.

"There is no other way to view this move, in our opinion, than as a way for Citigroup to raise cash prior to its fourth-quarter earnings release," Oppenheimer & Co analyst Meredith Whitney wrote. She said she expects further asset sales or spinoffs as Citigroup's balance sheet losses mount.

But in tight credit markets, Citigroup's ability to spin off assets may be limited, and the bank is still exposed to a deteriorating economy that is expected to cause credit losses, such as in credit cards, to soar further.

David Trone, an analyst at Fox-Pitt Kelton, said major asset sales are "not even feasible" in this environment. He said the only option is to split Citigroup into separate, publicly-traded companies.

"By overhyping Citi's intentions, all today's reports will do, in our view, is establish false expectations in the market," he wrote. "When the market realizes that management has no intention or no ability to find buyers in any event, we see Citi's stock falling in disappointment."

Eight analysts who issued estimates in the last week forecast, on average, that Citigroup would report a fourth-quarter loss of $1.00 per share, according to Reuters Estimates.

In morning trading, Citigroup shares fell 82 cents, or 13.9 percent, to $5.08 on the New York Stock Exchange.

The annual cost of protecting $10 million of Citigroup debt against default for five years rose to $330,000 from $265,000 on Tuesday, according to Phoenix Partners Group.

(Reporting by Jonathan Stempel; Additional reporting by Dena Aubin and Dan Wilchins; editing by John Wallace)

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