Citi separates credit card unit - Emirates24|7

Citi separates credit card unit


Citi, battling to restore profit after a record loss, broke up its consumer banking group, creating a new unit for credit cards and re-organising the rest of the division along geographical lines.


Steven Freiberg, the current co-head of consumer banking, will run the credit-card business, the New York-based company said today in a statement. The rest of the group, mainly bank branches and non-bank lending, will be led in the United States by Terri Dial, who is joining from Lloyds TSB Group, and four regional chiefs outside the US.


Vikram Pandit, who succeeded Charles O Chuck Prince as Citigroup chief executive officer in December, is reshuffling management after the company, which has at least 200 million customer accounts in more than 100 countries, lost half its market value in six months. The five consumer chiefs will report to Pandit as he bids to reverse last quarter’s 35 per cent profit decline for a unit that contributes 70 per cent of revenue and previously was run by just two people, Freiberg and Ajay Banga.


“Past performance has been disappointing,” said Guy De Blonay, a director at New Star Asset Management Group Plc in London who helps manage $1.2 billion (Dh4,4bn) in financial stocks. “In being quite aggressive in removing people and getting in fresh blood, hopefully they can turn around the story.”


Banga will transfer to Hong Kong from New York to become the regional chief for Asia. William Mills will run Western Europe and the Middle East, Shirish Apte takes charge of Central and Eastern Europe and Manuel Medina-Mora will head Mexico and Latin America, the company said.


Pandit, in the middle of a six-month, companywide review that has taken him to offices in Warsaw, Istanbul and Seoul, wants to increase collaboration among different Citigroup businesses, eliminate bureaucracy and create a “nimbler, more client-focused organisation”, according to the statement. The new structure “empowers” the regional leaders “to make decisions on the ground”, Pandit wrote in a memo to the bank's more than 300,000 employees.


The bank has slashed more than 6,000 jobs this year following a net loss of almost $10bn in the fourth quarter because of sub-prime mortgage writedowns at its trading business. Pandit also is reducing loans and securities to shrink the bank’s balance sheet, the largest in the US with $2.2trn of assets as of December 31.


The shares of Citigroup have tumbled almost 30 per cent this year in New York trading after more than $20bn of mortgage writedowns and losses on junk-grade, or “leveraged” corporate loans.


“Unfortunately, I really don’t think that re-organisation of responsibilities is a big deal for Citigroup,” said Charles Bobrinskoy, vice- chairman of Ariel Capital Management in Chicago, which owned about 680,000 Citigroup shares as of December 31.


“People are focused correctly on the mortgage portfolio, on big losses in leveraged lending, so who reports to whom in the consumer and regional banking businesses is frankly not what’s going drive the stock.”


Citgroup’s shares fell almost 10 cents to $20.73 as of 9.54am, on Monday in New York Stock Exchange composite trading. (Reuters)