Citigroup Prepares for a Breakup

Source: CSB Insighter, Corporate Executive Board


Citigroup Prepares for a Breakup
New York Times, 14 January 2009

Wall Street is aflutter over Morgan Stanley's $2.7 billion purchase of Citigroup's US brokerage business, Smith Barney. Wall Street also anticipates a further dismantling of Citi's consumer-lending unit, CitiFinancial, (and several other financial services) to counter a potential $10 billion loss, marking a true end to its "universal bank" business model.

Our View: Companies are taking a range of restructuring actions in order to shore up their business. Some companies are merging in order to secure better interest rates, while others are spinning off underperforming businesses to focus on businesses with more growth potential. The one consistent trend we see with the best-run companies is that they are keeping a close eye on potential changes to the current regulatory environment to foresee shifts that would dramatically impact their industry and/or business model.