NEW YORK – For the first time in more than two years, Citigroup Inc. is no longer partly owned by the U.S. government.
U.S. taxpayers made out well when the Treasury Department sold off the last of its stake in the giant banking company Tuesday, netting a profit of $12 billion on the government’s investment of $45 billion.
CEO Vikram Pandit now has to work on pleasing his other shareholders. For Pandit, who has seen Citi through the two most tumultuous years in the company’s history, it’s time to get back to basics. Investors are keen to hear Pandit articulate a vision for one of the largest and most embattled banks in the world.
“It’s great that Citi is independent once again,” said Cassandra Toroian, chief investment officer at Bell Rock Capital. “But now, Pandit has to show that he can hunker down and really run this business sustainably.”
The government’s exit will help improve morale at the bank and reel in clients who had previously avoided Citi. Also, many large investors who stayed away because of the uncertainty over what the government ownership meant are also likely to look closely at Citi stock.
Citi has focused much of its energies in the past two years cutting off parts of its businesses that don’t fit with its main banking operation. Citi has sold its European credit card business, brokerage operations in Japan, a 50 percent stake in the brokerage Smith Barney, and various insurance businesses for a total of $44 billion.
Today, Citi holds $421 billion in “non-core” assets, down sharply from $827 billion in the first quarter of 2008. Investors are happy with the way that trend is going, but they still worry that some of those non-banking assets include complex mortgage-backed investments and hard-to-value securities.
“There’s still concerns about what they have in their books,” said Jeffery Harte, banking analyst at brokerage firm Sandler O’Neill & Partners. “What I like is that they have identified what they will sell; they just have to keep executing.”
Unlike other large U.S.-based banking conglomerates like JPMorgan Chase & Co. and Bank of America Corp., Citi’s banking business is global. With growth in emerging markets like China, India and Brazil outpacing the U.S., Citi looks attractive. Many investors like Citi’s reach with its 4,600 branches in 40 countries, making it the most international among the large U.S. banks.
“No other U.S. bank has the ability to go after international consumers like Citi,” Harte said.
Citi’s broad international reach has helped the bank post profits for three consecutive quarters this year and investors have cheered. Citi’s stock is up 40 percent this year, making it the best-performing stock among major U.S. banks. On Wednesday it gained 2 cents to close at $4.64.