Citi Splits 'Supermarket' after $8.9m fourth quarter Loss
New York - Citigroup has posted a fourth quarter loss of $8.9 billion, making for overall losses of $18.7 billion for 2008, and announced the splitting of its businesses. Citi received an initial government cash infusion of $25 billion as part of the US government's Troubled Asset Relief Program in October, but it received a further regulatory warning in late November, when its plummeting share price prompted the government to give it a second injection of $27 billion.
In 1998, former chairman, Sanford Weill merged insurance firm Travelers Group with Citi, then the largest US bank. Weill's successor, Charles Prince, departed in December 2007 when the current chairman Vikram Pandit took over. The division of Citi's troubled empire after 52,000 job losses in 2008 effectively marks the end of the firm's cherished 'financial supermarket'.
Citigroup chief executive William Smith said the bank embarked on the right strategy at the wrong time - having missed the opportunity two years ago to streamline its extensive businesses. Citi's huge retail brokerage Smith Barney will separate from the firm, after Morgan Stanley agreed to buy a 51% share in the brokerage for $2.7 billion, with allowance to purchase the rest of the business in three years' time at a price to be agreed then. The sale is a particular blow to Citi as Smith Barney has remained one of its most profitable businesses since the financial crisis. The Morgan Stanley-Smith Barney combined brokerage will include around 19,000-20,000 brokers and 1,000 retail offices.
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