In the first step of an expected overhaul of Citigroup by Vikram Pandit, the bruised bank agreed to sell 51% of Smith Barney to John Mack's Morgan Stanley.
<http://money.cnn.com/2009/01/13/news/companies/citigroup/index.htm?postversion=2009011319>
In a nutshell, we could probably see more of Citi's breakout of its various units if it is still unable to turn itself out within the year. Share prices isn't reflecting well on the bank and in my opinion, the CEO hasn't really done much for the past 1 year plus since he took over and investors is still isn't convinced that the bank can survive its universal business model with high capital ratio and government support.
My take, if the Smith Barney unit isn't good, why will Morgan Stanley buy it? In such bad times, only good things get sold and for a discounted price. This simply doesn't benefit Citi in any way and one must take note of how the media actually wrote that it benefits both parties. It only benefits Citi because Citi needs the capital, and not making a good deal out of this. I wonder if Citi sells of its Card unit and Consumer banking unit, will it still be considered as a bank?
One good thing that I can think of which is coming out of this de-leveraging for Citi is they will have a very clear company goal after all the selling. The old Citi has literally everything, ranging from consumer banking, brokerage, investment, commerical banking, insurance, global wealth management and many more! Your business model can have alot, but what is the core of your business? I guess investors couldn't see this and thus the share price tumbling. Morever, I think there are shortists at work on this counter too, resulting in heavy fall.
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