Nearly a year after an unprecedented meltdown in the financial industry, the story of Citigroup (C) continues to be written in, and shape, the financial news.
A report on CNNMoney.com shows the financial giant has accomplished a lot in the last 12 months, shedding nearly $100 billion in assets. However analysts say the company that once touted itself as a “financial supermarket” has a lot of work to do before it will be considered in fighting shape.
“They have done a lot but have a lot to go,” said Jason Goldberg, an analyst for Barclays Capital who tracks the company. “You can’t turn an oil tanker on a dime.”
“Turnarounds are not usually this messy or this complex,” said Lamb, who at one time served as an advisor to Citigroup.
Citigroup has largely focused on selling off businesses including the sale of its Nikko Cordial Securities unit and Diners Club North America credit card business.
In its last major move before the end of 2009, the company announced plans to take its Primerica life insurance unit public.
And analysts concede that Citigroup might be even slimmer today if the market for some of the assets was better.
Severe losses in its retail partner credit card business and consumer finance unit CitiFinancial, for example, have likely made potential acquirers gun shy.
And any offers are likely not being given serious thought. While buyers are bargain hunting, Citigroup is being careful to operate in the best interest of their shareholders. This means not allowing these businesses to leave at fire sale values.
To illustrate that point, for all the benefits the restructuring has brought about for Citi, it may come to regret their decision to sell a majority stake in its consistently profitable Smith Barney business to Morgan Stanley (MS, Fortune 500). Under the terms of that joint venture, Morgan Stanley is expected to own all of Smith Barney within five years.
“With the stock market improving, it is starting to look like a really good bet for Morgan Stanley,” said Milestone’s Varughese. “If you look back in hindsight, that would be one deal Citigroup would probably regret.”
But even the boldest skeptics would concede that the changes the company is implementing are helping put some of Citi’s troubles behind it.
Last month, Citi returned the $20 billion in outstanding bailout money owed to American taxpayers. And it is expected that within the year, the government could sell off its remaining common share stake in the company. The Treasury Department still owns about a quarter of the bank.
Shares of Citi, which briefly fell below $1 a share at the height of last year’s financial panic, have since rebounded to about $3.60 a share.
What’s more, the businesses that the company has staked its future on, otherwise known as Citicorp, has hinted that brighter times lay ahead.
In the two quarters since the company has reported separate results, Citicorp has delivered profits of $3.1 billion and $2.3 billion, buoyed by the performance of its investment banking, transactions services and worldwide retail banking operations.
