Citigroup: Will Breaking Up Be Hard to Do (Well)?

Analyst: Bill Bradway

January 15, 2009

Citigroup is an aggregation of companies across several lines of business that have never been integrated into an effective financial supermarket. While one can debate the wisdom of assembling the parts that make up Citigroup, the reality today is that the company has been poorly managed over the years and the risks undertaken clearly were not understood.

Government regulators appear to be forcing this action to happen sooner rather than later. Now that the US government has invested $45 billion in preferred capital and provided guarantees on hundreds of billions in its investment portfolio, the time has come to disaggregate Citigroup instead of hanging on to the supermarket dream and hoping for happy days.

Citigroup, suffering from huge credit related losses, plans to spin its Smith Barney unit into a joint venture with Morgan Stanley. Other Citigroup business units are rumored to be on the block for divestiture.

Can Citigroup succeed at breaking up its financial supermarket? Is this the end of the financial supermarket model for all big banks? What will be the consequences for Citigroup's FinTech vendor community?

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