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    Citigroup plans to slash $400 billion in "legacy assets"

    Hurriyet English with wires
    09.05.2008 - 10:54 | Son Güncelleme:

    U.S. banking giant Citigroup Inc. said Friday it plans to shed about $400 billion of "legacy assets" over the next two to three years and grow annual net revenue by 10 percent over the next few years, as it tries to recover from the subprime mortgage crisis. (UPDATED)

    "There will be more" divestitures, Citigroup CEO Vikram Pandit, who succeeded Charles O. Prince in December, was quoted as saying at a shareholders' meeting at the bank's New York headquarters. 

    In slides posted on the largest U.S. bank's web site, Citigroup said it has about $500 billion of "legacy assets." It said it expects to reduce this amount to less than $100 billion within two to three years. As a result of shedding this amount the bank's assets will be winded down to approximately $1.7 trillion, from its $2.2 trillion.

    Citigroup noted that the vast majority of its assets are within its consumer banking and securities banking operations, 63 percent and 34 percent, respectively. By type, the company said the legacy assets are 18 percent non-core, 34 percent according to current market value and 48 percent low-return as of the first quarter.   

    It also said it is targeting annual net revenue growth of 10 percent from core operations. It said this includes increases of 7 percent from card operations, 8 percent from consumer banking, 9 percent from both securities and banking and from wealth management, and 14 percent from transaction services.

    Citigroup projects revenue growth over the next two to three years to be strongest in its transaction services division, where it is targeting 14 percent growth. The company believes its global cards business will see the smallest revenue growth, at 7 percent.

    Amid substantial turmoil in the credit markets, Citigroup generated $13.22 billion in revenue during the first quarter - 48 percent less than the $25.46 billion it generated during the first three months of 2007.

    Citigroup has written down its assets by some $38 billion since late summer of 2007, built up its reserves to account for future consumer loan defaults, and raised more than $40 billion in cash by selling stakes to outside investors, offering new stock in the markets, and shedding other assets. Executives have also announced global job cuts amounting to 13,200 so far.

    Citigroup has been under heavy investor scrutiny over the past year as the value of its stock tumbled. Many Citigroup holders have been angling for a large-scale overhaul of the company’s structure.

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