He has slashed 100,000 jobs, built up a cash position, cut billions of dollars in expenses and overhauled management.
But the most important thing Vikram Pandit says he has done as chief executive of Citigroup Inc. was to draw a line in the sand between the businesses that would stay and those that would go as the chastened financial giant seeks to remake itself.
The keepers are supposed to focus Citi on clients instead of products. They are intended to make the company less reliant on wholesale funding and less vulnerable to the type of wild market swings that inflated Citi's profits before decimating them entirely.
But before Citi can be the bank envisioned by Pandit, it must dispose of the assets in Citi Holdings, the division composed of everything that has been deemed noncore to the company, or too toxic to hold onto.
This task looks easier today than when the creation of Citi Holdings was announced in January; unloading risk at any price looked next to impossible then. But until the slush gets mopped up from previously frozen markets, it remains unclear how swiftly Citi can move and how successful it will be in shedding noncore businesses without destroying whatever value they have retained through the crisis.
Pandit has declined to put a time frame on the strategy, but he has been quick to argue that Citi Holdings should not be viewed as a "bad bank" where troubled assets go to be punished.
"There are a number of very attractive businesses in Holdings, and these businesses, by the way, would not be in anybody else's bad bank. They just happen to be not strategic to our future," Pandit said last week at a Barclays Capital financial services conference.
The brokerage, asset management and consumer lending businesses contained in Citi Holdings cut across an array of business lines and geographies. They include a 49% stake in Smith Barney, which was put into a joint venture this year with Morgan Stanley, and a 75% stake in a pension fund in El Salvador. They include strong brands, such as Primerica and CitiFinancial, and more obscure assets, such as credit card businesses in Turkey, Greece and Portugal. Citi Holdings also is the dumping ground for toxic investments in collateralized debt obligations, auction-rate securities and structured investment vehicles.
At the end of the second quarter, $649 billion of assets sat in Citi Holdings. Managing them has required a battery of approaches because different components of the division are expected to meet different fates. Some, like the Japanese retail brokerage Nikko Cordial, will be sold, and others will be wound down as loans mature. But the end-game for each asset could change as conditions warrant.
For example, Citi had stopped making consumer loans in several Nordic countries, a sign that it would simply allow those businesses to run off. But when a buyer emerged for a consumer-finance operation in Sweden, Citi switched gears and sold it.
Overseeing all of the decisions is Michael Corbat, a 26-year veteran of Citi who has worked domestically and abroad, in businesses including corporate and commercial banking, global wealth management and emerging market debt - a breadth of experience seemingly well suited to the diversity of assets in Citi Holdings.
But the attribute that might serve him best in the role is patience. "This is a tough time to try to sell some of these assets because it's still a buyer's market," said Charles Wendell, president of Financial Institutions Consulting Inc. in Ridgefield, Conn. With other banks more interested in fleeing than acquiring businesses like auto lending and consumer finance, the pool of possible suitors is largely limited to hedge funds and private equity firms that will be eager to drive a hard bargain, he said.
But with no timetable ascribed to the disposal of Citi Holdings, Corbat said he will not be rushed into sales unless they make sense from a price perspective and in terms of the amount of risk and complexity they would allow Citi to remove from its business.
"As the market catches up and closes [in on] our price... then we look and say, 'Okay, now it makes sense to sell it,'" Corbat said in an interview.
Citi already has lined up a Japanese buyer for Nikko Cordial, and the firm plans to eventually sell the rest of its Smith Barney stake to Morgan Stanley. Smaller divestitures have included the recent sale of three North American credit card portfolios with about $1.3 billion of managed assets.
Other businesses in Citi Holdings include portfolios for mortgages, auto loans and student loans; consumer lending operations in more than a dozen countries; Afore, a retirement fund administrator in Mexico; BellSystems 24, a call center in Japan; and commercial credit card operations including Diners Club. The division also holds about $200 billion of distressed securities.
Corbat has paid visits to many of the businesses that were placed in Citi Holdings to keep employees engaged and to encourage their participation in the restructuring of their groups, reminding them that they can best position themselves by making their business attractive to a buyer who might bring over the employee base as part of an acquisition.
"You owe the employees the intellectual and moral honesty of telling them their businesses are for sale," Corbat said. But "you've introduced this uncertainty that probably doesn't age that well."
Uncertainty typically does not age well with investors, either. But between government support and other funding rounded up since the crisis began, Citi may have time on its side when it comes to resolving the fate of the assets in Citi Holdings - even the assets that cost Citi the most when the disarray in the financial markets led to painful writedowns.
"They've got the capital to hold it now," said Standard & Poor's equity analyst Stuart Plesser, who has a "buy" rating on Citi's stock. "And what else can really happen here that's going to destroy the value of these [assets] any further? There's nothing but upside here as they start reducing these assets."