Citigroup Inc. (C) is exploring the possibility of selling parts of the company or an outright sale following the plunge in its stock price, the Wall Street Journal reported Thursday, citing people familiar with the matter. The report comes close on the heels of news earlier in the day that Saudi Arabian investor Prince Alwaleed bin Talal bin Abdulaziz Al Saud plans to increase his holdings in Citigroup back to 5% from less than 4%. Despite the news, the company's shares plunged 26% on Thursday.
According to the report in the Wall Street Journal, or WSJ, internal discussions at Citigroup are at a preliminary stage and do not imply that Citigroup's board and management have backed down from their stance that the company has ample funding, capital and strategic direction. The report said, citing people familiar with the situation, that the company's board of directors is slated to have a formal meeting on Friday to explore the options.
The company's top executives are reportedly exploring the possibility of selling parts of the firm, including the Smith Barney retail brokerage, the global credit-card division and the transaction-services unit, which is one of Citigroup's fast-growing businesses.
Citigroup's shares plunged to below $5 on Thursday for the first time in more than fifteen years as investors are apprehensive about the bank's ability to handle potential credit losses and writedowns in 2009. In order to comply with investment guidelines, mutual funds and institutional investors are required to unload the company's shares if the share price falls below $5. The company's shares have fallen 50% in the week.
The WSJ report also noted that Citigroup officials have been urging lawmakers and regulators in Washington to intervene by making it tougher for investors to place bets that the company's share price will fall, a strategy known as "short selling". The company, along with representatives of other banks, is lobbying with the U.S. Securities and Exchange Commission to reinstate the ban it temporarily imposed on short-selling of financial stocks earlier in the year.
Citigroup, the second biggest U.S. bank by assets, has been among the banks hardest hit by the ongoing credit crisis. The company has posted four consecutive quarterly losses, losing more than $20 billion over the last four quarters, hurt by massive write-downs of bad debts.
The company has raised about $75 billion since December by selling assets and equity stakes, including a $25 billion capital infusion from the US Treasury.
Earlier in the week, Citigroup said it plans to cut about 52,000 jobs and reduce expenses by 20% from their peak as the economic crisis worsens. The job cuts are in addition to the 23,000 jobs eliminated by the company during the first nine months of 2008. At the end of the third quarter of 2008, the company had about 352,000 employees worldwide.There have also been speculations that Citigroup's top executives would go without bonuses this year.
However, investors are concerned whether mounting credit losses and toxic debts would offset the company's efforts to slash costs and increase deposits. In addition, the slump in the commercial real-estate market, the Treasury's recent decision not to buy bad assets directly from banks, and Citigroup's recent decision to take on about $17 billion of assets from a subsidiary have also hammered the company's shares.
Citigroup last month had lost the fight to buy Wachovia Corp. (WB) to Wells Fargo & Co. (WFC), which came up with a higher offer. Citigroup is reportedly seeking billions of dollars in damages over the breakup of its deal. The loss of Wachovia triggered troubles inside Citigroup, with some executives blaming Pandit and his team.
According to reports earlier on Thursday, Saudi Arabian investor Prince Alwaleed bin Talal bin Abdulaziz Al Saud plans to increase his holdings in Citigroup back to 5% In addition, the prince expressed complete support to the Citigroup management, led by CEO Pandit.
The decision by Prince Alwaleed follows several measures by Citigroup to bolster its capital that have enabled the company to raise its Tier-one capital ratio to more than 10%. An increased stake by the prince was seen as a sign of confidence for Citigroup and its CEO Vikram Pandit.
The prince noted that Citigroup has raised $50 billion in private capital in addition to $25 billion in government assistance under the Troubled Asset Relief Program. The $50 billion of private capital investment includes a $7.5 billion capital infusion from the Abu Dhabi Investment Authority that put its holding at 4.9% and made it Citigroup's largest shareholder.
In order to bolster investor confidence, Citigroup said on Wednesday that it will buy $17.4 billion in assets from its structured investment vehicles, or SIVs, - complex investment tools that first encountered trouble last year due to their mortgage-related holdings.
The SIVs have been selling assets as part of an orderly asset-reduction plan to fund maturing debt obligations on a timely basis, and have reduced long-term assets from $87 billion at the end of July 2007 to $17 billion at present.
C closed Thursday's regular trading session at $4.71, down $1.69 or 26.41% on a volume of 724.37 million shares.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.