Citigroup chief financial officer Gary Crittenden said the bank will hold onto assets in emerging markets as it focuses on faster-growing regions after receiving a $US20 billion government cash injection.
"Our emerging markets franchise is the core of the company," Crittenden said in a Bloomberg Television interview. "From a capital standpoint, there is no need for us to sell assets at this point, although we'll continue to work away on non-strategic assets."
Citigroup's stock last week fell below $US5 for the first time since 1994, sparking concern that customers might pull their money and destabilize the New York-based bank, which has $US2 trillion in assets and operations in more than 100 countries. The government on November 23 agreed to help support the company with the injection and by providing guarantees on $US306 billion of mortgages and other troubled loans and securities.
Analysts and investors, including Christopher Whalen of Institutional Risk Analytics, said yesterday the bank should be broken up and its businesses run by stronger companies. HSBC Holdings Stephen Green said yesterday the London- based firm would consider buying the "right" assets from Citigroup in the event of a breakup or sale. The government's aid package itself has attracted criticism from investors such as Jim Rogers, chairman of Rogers Holdings.
"Why are 300 million Americans having to pay for Citibank's mistake?" Rogers told Bloomberg Television. "The way this system is supposed to work, people fail, and then the competent people take over the assets from the failed people and you start again with a new, stronger base."
Sagging Stock
The bank's stock price is down 79% this year, even after rallying 58% yesterday after the government banking was announced. The shares rose 33 cents, or 5.6%, to $US6.28.
Global banks including Citigroup, Standard Chartered and HSBC are putting more emphasis on emerging markets in Asia, the Middle East and South America as the US and European economies sink into recession. The U.S. accounted for 45% of Citigroup's net revenue last year, down from 59% in 2005, according to data compiled by Bloomberg. The share coming from Asia almost doubled in the period, to 17.1%.
"It will be very painful if Citi jettisons any of its key businesses in Asia at this point of time," Emmanuel Daniel, president of The Asian Banker, said in a Bloomberg Television interview. "It'll probably be more likely to scale down some of the large markets it operates."
Wells, Wachovia
Citigroup's crisis escalated as it was forced to take on its balance sheet a number of special units created to invest in riskier securities.
Wells Fargo is absorbing Wachovia, the bank that regulators pushed in September to merge amid mounting losses from $US120 billion in a portfolio of home loans. Bank of America has taken on both Countrywide Financial Corp., once the biggest independent mortgage lender, and Merrill Lynch, the securities dealer hobbled by $US24 billion of losses. Morgan Stanley slumped almost one-third in the past three months.
With reference to buying Citigroup assets, Green said "It would depend," in an interview at the Confederation of British Industry conference in London yesterday. "We have a clear strategy to develop our business with a primary focus on emerging markets, and that means Asia, the Middle East and Latin America."
HSBC earns more than three-quarters of its profit in emerging markets and has avoided the funding strain that's led banks including HBOS to be bailed out by the British government.