Citi Group Restructuring

Background It all began with the financial crisis of 2007-2008, a crisis which was of a subdue that had never been seen before. Many economists called it even worse than the Great Depression. Whether it was or not, thats something that could be argued. But everyone was of the view that the crisis is really very serious. As a result of it large financial institutions collapsed, banks were being bailed out by the discipline governments and stock markets tanked to their new lows.This caused the collapse of housing markets in legion(predicate) countries, consumer expending suffered immensely as a result, industries went bankrupt, chorees closed d have got and unemployment peaked. There were many reasons that were put forth by various economists. A report presented in the US senate called it as the failure of regulators, credit agencies and markets. Citi classifys Sufferings According to a US governments report which came into the light in 2011, Citigroup which was the third largest US bank in terms of assets at that time was on the verge of failure.Regulators were going to pull the plugs on it anytime as depositors were withdrawing their deposits and banks counterparties also declined to give credits to the bank. How Citigroup moved to new setup? Citigroup suffered losses for five consecutive quarters. In the fifth quarter, in fact its losses were to the tune of $ 8. 29 billion. Many in the Citigroup agreed to the fact that unless something is through to sharpen its strategy, Citigroup will never regain its glory and perform accordingly.As a result, Citigroup started analyzing its business and strategies. It was found that Citigroup was involved in too many business segments which stopped it from focusing on its core interest argona. While analyzing, everything gravid or small was examined. Citigroup in its annual report called the analysis as wide ranging and dispassionate. The outcome of this analysis was that the Citigroup finally decided to aline the groups various business interests in two bighearted segments Citicorp and Citi Holdings.The thinking behind this new setup was that this structure will service the company focus on its core business areas which in originate would improve the overall cognitive operation, while at the same time realizing the foster from its non-core assets. The new structure would look like this In Citicorp, businesses which were core to the groups strategy and which offered maximum earnings potential to its shareholders with appropriate take chances parameters were placed. These businesses are Global Transaction Services Treasury and Trade Solutions Securities and line Services Securities and Banking Global Banking Global Markets Citi Private Bank Citi Capital Advisors regional Consumer Banking Four Regional Consumer Banks in northerly the States, EMEA (Europe, Middle East, and Africa), Latin America and Asia that each include sell banking, local commercial banking and Citi-branded cards (Source http//www. citigroup. com/citi/investor/every quarter/2010) Citicorp, according to the new structure will be a blood driven global bank, to overhaul both consumers and businesses.The assets of Citicorp include its core assets locate across the globe with strong presence in emerging markets like India, China etc. Citicorp will have the capability to take deposits from customers end-to-end the world in a manner so that maximum outcome could be availed. Citicorp will have the capacity to serve local customers globally and global customers in a highly localized way. While in Citi Holdings, assets and businesses which were not central to Citis strategy were placed.But that does not mean that those assets were not good. Some have had very high value in their own right. Some were big iconic brands like Morgan Stanley Smith Barney joint venture. Citi Holdings includes securities firm and Asset Management, which includes the Morgan Stanley Smith Barney joint venture Loc al Consumer Lending North America, which includes residential and commercial real estate loans auto, student and personal loans and retail partner cards International, which includes Western Europe consumer banking and other consumer finance franchises near the world Special Asset Pool, which includes non-core assets, many of which are illiquid in true markets Citi Holdings will consist of non-core businesses which attract long term investments. But since those businesses are not the core one, therefore they do not enhance the performance of the group as a whole and in fact they cope for the limited resources that the company could employ in a highly uncivilised and volatile event.It was expected that the makement team of Citi Holdings will restructure, divest and manage its business in a way that maximizes the value and will take the group forward in a tough economic situation Vikram Pandit, then CEO of Citigroup in one of his interview talked about accelerating the instru ction execution of its newly evolved strategy to focus on its core business. disposed(p) the market conditions and business sentiments, Vikram Pandit wanted to streamline the business of Citigroup as in short as possible to further strengthen its position and better serve its clients.