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Why Split it When You Can Sell It?
Citigroup surprised investors again this morning saying that they would sell as much as $400 billion in assets over the next several years. This amounts to just about 20% of their current asset base. In recent years the bank has been criticized as being too big to manage effectively. The move to sell assets is in response to those who had wanted the bank to spin off several divisions and break the bank up. Among the assets to be sold are the real estate, leveraged loans and Structured Investment products that caused much of the banks current difficulties.
At a meeting with investors and analysts this morning CEO Vikram Pandit said that the bank would revive as much as $15 billion in re engineering benefits form the moves and be able to regain solid growth rates going forward. He expects the bank to resume revenue growth of 8 to 10%.
Where does he see Citigroup's growth coming from? Read on to find out.
He broke down for investors what segments he expects to provide the growth for Citigroup:
7% annual revenue growth form credit cards
8% from consumer banking
9% from Securities and wealth management
14% from transaction services
Pandit has also set a goal for the bank of a 16 to 18% return on equity for Citigroup. He described the steps the bank must take to recover from the financial crisis as get fit, restructure and then maximize.
Ananlysts were cool towards the plan with most keeping their ratings unchanged. Several pointed out that Citigroup still has enormous exposure to subprime and other leveraged securities and could face still more asset write downs in the months ahead.
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