Citigroup Seeking Buyers For $400 Billion in Assets

Citigroup's Vikram Pandit announced today that the bank would be selling $400 billion of assets it identified as "not central" to its mission, including $170 billion worth of marked-to-market assets in its investment banking division. Pandit's ambition to streamline Citigroup's bloated balance sheet is predicated on a number of highly optimistic assumptions. First, Citigroup needs to find investors with very deep pockets that would consider buying Citi's garbage, over that of all the other garbage currently being aggressively marketed on the Street. Other banks and insurance companies are also slashing assets so the buyers will need to come from somewhere else. Sovereign wealth funds? Maybe, but they may still be licking their wounds from premature investments in the first of Citi's "final" capital raising schemes. Second, Citi is hoping, possibly praying, that it will be able to sell assets at prices somewhere close to where they are being carried on its books. Given that only $170 billion of the assets are marked-to-market, it seems unlikely that Citi will be able to pull this feat off without taking yet another massive write-down. Finally, Citi believes that when it allows some of the loans to mature, the borrowers will be able to repay the loans in full. This assumes that other banks will step into Citi's shoes to offer financing at similar terms, or that the borrowers will have the money to pay off the loans. It is hard to imagine that Citi has been a prudent and careful underwriter of its loans in recent years given that it has taken around $44 billion in asset write-downs. It is also somewhat inconceivable that borrowers will be flush with cash without the need to refinance, given that the US economy teeters on the brink of Recession. The proceeds from this yard sale may not live up to expectations. Mr. Pandit will then need to move on to Plan B. Or is it C? D?