Citigroup after reporting losses for the past few quarters has decided to split its non responsive business section from the more healthier ones. Amidst high pressure from the USA government and various other sectors, Citigroup has finally decided to go ahead with the break-up It is reported that the business worth more than $ 600 bn dollar will form the non-core area and will be represented separately on company's annual balance sheet. The move is an effort to restore the credibility of the bank in the global market.
According to the industry experts the high risk US consumer finance and securities business of the Citigroup has become a threat to the company's survival and its segregation from the performing areas seems to be the only way to sail through the prevailing financial crunch. The company will sell off the section as the market situation improves or gradually spun it off.
The current break-up will be a corner stone in dismantling the 1998 merger of Sandy Weill's Travelers' and John Reed's Citicorp that lead to the formation of Citigroup. The new Citi will have more of the Citicorp look along with some of the high-yielding sections of Travelers' such as advisory, underwriting and market-making. Whereas in the long run the company does not want to overburdened itself with the loss making sections of Travelers' such as Subprime mortgages and Primerica door-to-door insurance salesforce.
Mexico's Banamax, US branch network, private banks of the company, payment business and the investment banks are likely to form the core arm of Citi. Citigroup has already sealed a deal for the merger of its Smith Barney with Morgan Stanley.
