Citigroup reports quarterly loss and plans to split into two businesses

| January 16, 2009 | 0 Comments

US banking giant Citigroup has today announced a worse-than-expected fourth quarter net loss of $8.29 billion (£5.6 billion) and said it plans to split the firm into two separate businesses to restore profitability.

The bank’s net loss for the last quarter of 2008 works out at $1.72 per share, far worse than most analysts’ forecasts of a $1.19 per share.

Shares in Citigroup plummeted 21% in early trading yesterday amid fears of the loss and speculation that it would have to be nationalised in order to survive.

The news comes on the same day that emergency funding of $20 billion (£13.4 billion) has been provided to Bank of America.

The funding provided to Bank of America by the US Government will enable the bank to absorb the losses it incurred following the takeover of Merrill Lynch.

Meanwhile, last autumn, Citigroup had to be bailed out by the US Government in a deal worth $45 billion and today’s loss is the bank’s fifth consecutive quarter in the red as the global financial crisis looks far from recovery.

With regard to splitting into two, Citigroup said it would separate the company, for management purposes, into two separate businesses - Citicorp and Citi Holdings.

Citicorp will manage the company’s traditional banking work, while Citi Holdings will handle the firm’s riskiest investment assets.

Citigroup chief executive, Vikram Pandit, said the new measures will help in our ongoing efforts to reduce our balance sheet and simplify our organisation.

In related news, Merrill Lynch has today announced a record loss of $15.31 billion (£10.26 billion) for the final quarter of 2008.

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