Citibank Will Split Into Two Companies, Promises To Lend To Consumers
Vikram Pandit, CEO of Citigroup, announced today that the company would be split after reporting a net loss for 2008 of $18.72 billion. He also promised to put the money from the $700 bailout to work by extending credit to consumers and businesses... responsibly.
"Today, we announced that we would separate the company, for management purposes, into two separate businesses—Citicorp and Citi Holdings. We are setting out a clear roadmap to restore profitability and enable us to focus on maximizing the value of Citi and strengthening TCE.
"We are committed to helping the financial markets recover as quickly as possible. To accelerate that recovery Citi is putting the TARP capital it has received to work to support the U.S. economy and consumers - expanding the flow of credit to U.S. households and businesses responsibly and on competitive terms.
Citi Reports Fourth Quarter Net Loss of $8.29 Billion, Loss Per Share of $1.72 [Citigroup]
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Uh-huh.
Well, I'll be over here waiting for the APR on my Citi card to go back to its pre-freakout rate.
Waiting...
makes good sense. Lend from one company so if it goes to crap, you can shut it down w/o affecting your "main" holdings.
Wasn't this one of the banks that was 'too big to fail'?
Um... it's failing. Thus, the desperate act of chopping one of it's appendages off.
Splitting a financial entity into multiple holdings is one of the oldest tricks in the book. It ensures more work for the existing employees and makes things more complicated for the regulators. Plus, the whole asset protection/isolation thing.
@bluewyvern: My Citicard APR actually went down during the crisis. You might want to talk to someone...
I just put in for the rebate check on my cash back Citi CC. Better get my $110 before they decide to keep it.
$700 bailout? That's something I can get behind. Hell, I'll even pay for it myself!
I'm guessing they split into two corporations, where one is profitable and the other owns ALL the bad loans and debt.
The second company files for Ch. 11, and the profitable one keeps right along chugging.
Ironic and just that one of the unscrupulous organizations to have lobbied for gutting the important protections afforded by the 1933 Glass-Steagall Act with the 1999 Gramm-Leach-Blieley Act allowing for the merger of Citigroup and Travelers Group ultimately fails. These failures are due in large part because of the exact practices that rightfully should be prohibited.
http://www.consumerfed.org/pdfs/Gramm_Leach_Bliley_Testimony.pdf
Stop the bailouts, vote them all out, no incumbents.
NEW YORK (AP) -- Citigroup shares plunged Thursday near 16-year lows, as investors prepared for dismal fourth-quarter results and worried that the troubled bank might need another round of government bailout money.
Shares fell 70 cents, or 15.5 percent, to close at $3.83 after news came out that Bank of America Corp. has asked for more government aid to help it absorb losses from Merrill Lynch, the Wall Street firm it acquired last year.
Citigroup's stock fell as low as $3.36 -- well below last year's lowest closing price of $3.77. And they are not far from their recent 16-year trading low of $3.05, hit in November right before the government announced its extra dose of funding for Citigroup.
NEW YORK: World's largest lender Citigroup has awarded its newly-appointed CEO Vikram Pandit stocks worth $30 million, even as the India-born executive has decided to forgo a cash bonus at the crisis-ridden bank. The 1.1 million share units and options for additional three million shares being awarded to Pandit is estimated to be worth about 30 million dollars (Rs 120 crore) -- an amount close to six times of total compensation paid by all the Indian banks together to their top executives last fiscal.
The stock bonanza for Pandit comes within weeks of Citigroup announcing close to 4,200 job cuts across the world. According to reports, the bank has finalised close to 400 lay-offs in the UK, while the remaining 3,800 jobs would be eliminated in the US and Asia, including India.
The stock reward for Pandit comes just about six weeks after he assumed the office as the CEO of Citigroup.
@bonzombiekitty: yes. i have an MBNA card that was bought out by FIA (bank of america) & it still reports as first opened in 1998.
Yay! Two companies to send me 4 lbs of junk mail a week EACH!
Don't know why but they recently increased my credit limit on a card. While AmEx reduced the line on a different one. And the citi card is the balance at low% till I pay it off, while the amex is buy, then pay off the next month. Go figure.
@zigziggityzoo: I think that's the plan. Oh and I doubt they're lowering compensation for the top earners there. I'm willing to bet if the US Gov puts salary caps in place for bailout takers, they'll put that money in the "failing" company to fund operations during Chapt 11.
Citi tried to hike the rate on my credit card (cardholder for about ten years, never missed a payment, currently paying off the balance each month, but carried one in the past) from 9.99% to 14.99%. They set up a special number to 'opt out' of the hike, so naturally that's what I did. They're keeping my account alive until the expiration date on my card, which I believe is this coming September, and then the account will be closed. Not to worry, Citi, I'll never charge anything to that card again.
Having an E*Trade CC is more convenient anyway, as I have other accounts with them that I can link to the card for payment purposes.
I wonder where they'll end up shifting my brother too. What a bad time for him to graduate.
I think Citi ended up with $25 billion and not $700.
Most of me knows everything will just go on as before, but part of me is going, "OMG, what's going to happen with my mortgage and student loans?" Citibank holds both, and Citibank has been way better than Sallie Mae (my husband's student loan lender), and more consumer-friendly than ABN AMRO (which used to hold my mortgage), though I have no specific complaints about ABN AMRO. Citi just provides more comprehensive statements with better information to consumers and is more clear in communicating about things like escrow payments. (And I think it's an instructive case of how you can do just fine -- ABN AMRO -- but very small improvements like clarity of statements can make for a huge jump in consumer satisfaction; I'm much happier with Citi.)
I'm sure it will all be fine but I'd like a nice letter from Citi telling me exactly what will and will not be occurring w/r/t my PERSONAL accounts!
Given that this is essentially the structure proposed, gold star for you. Disagree on the bankruptcy, though - the holding company will get nationalized
@TinkishDelight: Yeah, mine's been steadily decreasing with the prime rate. It never jumped up like they promised to do to a number of cards.
good old citibank just hiked the rate on my mastercard from a consistent 8%ish to 15% randomly. no missed or late payments, heck I just had my limit up to 25k recently in the midst of credit line cuts. buncha asses, glad I don't maintain much of a balance anymore
I just made the same phone call to Citi about my interest rate JUMP. I was at 5.24%, never missed a payment, etc. and they raised it to 13.99%. I don't think so! I called the number and rejected the new terms as well and they put my rate back until the card expires. Then the card will close automatically. Fine with me!
Are Credit Cards staying with Citicorp or going to Citi Holdings is my question, its not very clear IMHO
@djshack: Just received my latest billing statement yesterday and noticed an unannounced jump to 14.9% from a much favored 8.9% during the worst of all the hullabaloo. No missed payments or any unfavorable recent activity on my part. Good thing it's queued up next on my debt snowball plan.
@Evil_Otto: I had the same thing happen. I called, but then I decided to opt in, because that is by far my oldest credit card, and I want to keep that history. I just won't use it anymore. That'll still help with the credit score, right?
My friend works for citi and they had a meeting last week and told everyone they were tightening their restrictions on lending and wouldnt even touch a new customer with a credit rating under 750. so, yeah, they are going to lend, but ONLY to those with excellent shiny, shiny credit.
So lemme get this straight. Citi got a bunch of OUR money that we paid/paying in taxes, and Citi promises to lend us OUR money back to us, and Citi gets to keep the interest?
If I get a loan from Citi to pay my taxes this year, will that cause disruption of the time-space continuum?
Hmmm... I'm with Eyebrows Mcgee,
What's going to happen to the credit loan and banking accounts that i have with Citibank when they split. A letter (even electronic) summarizing what the split means to the consumer, if anything, would be nice.
I had the exact 2 things happen also- it's crazy. Citibank (without any warning) increased my rate from 7.99% to 24.99% and gave me the option to opt out and let my card expire in September. I will never do business with Citibank again- I am taking my accounts somewhere else! And Am Ex, which we have had for years, never missed a payment, always paid it off on time gave us a limit. Isn't that the point of having the Am Ex? It's used for business trips- limits make that harder now.
I'm curious. Lets say Citi bought by a different bank, and the credit card accounts transfer to the new bank. Does the age of the account reported for credit reports remain after the transfer?