Citi to sell Smith Barney stake

Citigroup, which is among the country's hardest-hit banks, has been slimming down its sprawling structure and focusing more on traditional retail banking. -- PHOTO: AFP

NEW YORK - CITIGROUP Inc CEO Vikram Pandit confirmed on Wednesday that the bank plans to eventually sell the remaining stake in its Smith Barney brokerage venture to Morgan Stanley, which owns the other half.

Citigroup was widely expected to exit the joint venture, which was created in June, but Pandit's comments marked the first time the bank has publicly asserted its plans.

Citigroup and Morgan Stanley reached a deal in January to combine their brokerage and wealth management units, and the resulting joint venture was called Morgan Stanley Smith Barney.

Morgan Stanley, which holds a 51-per cent stake in the venture, paid US$2.7 billion (S$3.81 billion) to Citigroup as part of the deal. Morgan Stanley has the option to increase its stake after three years.

Citigroup, which is among the country's hardest-hit banks, has been slimming down its sprawling structure and focusing more on traditional retail banking.

At the beginning of the year, Citi split its operations into two divisions - Citicorp and Citi Holdings - in an effort to separate its traditional banking businesses form the riskier operations that have been the leading reason for its struggles.

Citigroup has slashed its assets by US$500 billion over the past 18 months, and Mr Pandit said he expects the bank's liquidity needs to lessen as it sheds even more.

'We're moving toward less capital intensive businesses as a whole,' Pandit said during the presentation.

To help Citigroup survive, the government pumped US$45 billion in bailout funds into the bank, US$25 billion of which was recently converted to a 34 per cent ownership stake.

Mr Pandit made it clear that the bank is looking to reduce its reliance on government support, saying the bank plans to repay the remaining US$20 billion preferred stake the government owns as soon as possible.

The Wall Street Journal reported earlier this week that Citi is considering a plan in which the Treasury Department would sell part of its holdings in the bank, while the bank would issue new shares to the public as part of a multibillion-dollar stock offering.

Mr Pandit said on Wednesday that the government's common stock holdings are not restricted and that it can choose to sell its stake in the bank at any time. -- AP