Citigroup Announces Plan To Shed $400 Billion in Assets

NEW YORK, May 9 -- Citigroup said Friday it would shed about $400 billion in real estate, loans and other assets over the next few years as it tries to return to profitability after huge losses in the mortgage and credit markets.

The banking giant, which has been divesting its businesses and raising billions of dollars of capital in recent months, also said that it aims to increase revenue by 9 percent annually and produce annual earnings of at least $20 billion.

The targets were revealed by Vikram Pandit, Citigroup's new chief executive, and his senior staff members during a much-anticipated presentation to investors and analysts in Midtown Manhattan.

Pandit, installed five months ago after his predecessor, Charles Prince, was forced to resign in the face of multibillion-dollar write-downs on the value of risky assets on Citi's books, has faced growing pressure from investors. Many have clamored for Pandit to slash costs and boost share prices, which have fallen by more than half in the past year. Some investors, frustrated with the pace of change, have called for drastic measures, such as a breakup of Citigroup's key businesses.

During the four-hour presentation and question-and-answer session, Pandit made clear that the company would focus on returns, managing risks, increasing efficiency across its businesses and restructuring Citi to tap the full potential of the bank's extensive global operations. He called for patience, telling the audience of about 250 that "this will take some time."

Afterward, some investors, while cautious about Citigroup's ability to meet its goals in a tough market environment, said they were encouraged by the bank's pledge to trim its balance sheet and control costs. "I feel comfortable in that management was on the offense rather than back on their heels. They looked confident," said Anton Schutz, president of Mendon Capital Advisors, who has been buying shares of Citigroup in recent months. "Now the proof is in the execution."

Citigroup said it has about $500 billion of what are called "legacy" assets, which it hopes to reduce to less than $100 billion within two to three years as the assets are sold or reach maturity. The $500 billion figure represents about a fifth of Citigroup's assets. Citigroup is the largest U.S. bank by assets. which totaled $2.2 trillion at the end of the first quarter.

Of the $500 billion, 35 percent is in real estate, 11 percent in high-risk securities called structured investment vehicles and 6 percent in highly leveraged commitments, Citigroup said. An additional 5 percent is in subprime collateralized debt obligations, complicated securities that have been the cause of much of the bank's $40 billion in write-downs. Four percent is in auto loans. Citigroup did not identify the remaining 39 percent.

"Their balance sheet had grown quite a bit . . . almost as if it was out of control," said Bert Ely, a banking consultant in Alexandria. The reduction "is the kind of move they need to be making as part of the turnaround effort."

Pandit on Friday outlined a three-step plan for Citigroup to "get fit," "restructure" and "maximize" its business. Since taking over, he has been working to implement the first phase of the plan, including slashing costs -- 13,200 job cuts have been announced this year -- and divesting such non-core businesses as Diners Club, CitiStreet and CitiCapital.

While Citigroup executives said they would continue to divest businesses, some investors have been pushing for a more radical slicing up of the company. At the Friday meeting, Pandit made clear he is committed to keeping the company intact while focusing his attention on businesses and emerging regions with the greatest growth potential.

"We believe the right model is a global universal bank," Pandit said. "This is the model that delivers the most shareholder value. And it's fundamentally different than a conglomerate or a financial supermarket. We are neither."

Citigroup shares slid 2.8 percent, closing at $23.63.