Citi burns despite reports of sale

Citigroup shares tumbled for a fifth straight day, as chief executive Vikram Pandit tried to downplay speculation the banking giant might sell major businesses to restore its health and investor confidence.

Citigroup shares tumbled for a fifth straight day, as chief executive Vikram Pandit tried to downplay speculation the banking giant might sell major businesses to restore its health and investor confidence.

Pandit told employees on Friday that Citigroup, the second-largest US bank by assets, does not want to change its business model and plans to keep its Smith Barney brokerage, according to sources.

He also said Citigroup had a solid capital position, and that employees should not focus on the bank8217;s falling share price because that is not what regulators and credit rating agencies worry about, the sources said.

In late-morning trading, the shares were down 85 cents, or 18 per cent, at 3.86, after earlier tumbling as much as 24 per cent to 3.58. They closed at 9.52 a week ago.

8220;It8217;s fear and panic at this point,8221; said Gerard Cassidy, analyst at RBC Capital Markets. 8220;Investors have seen similar movies this year, and the endings are very unpleasant.8221;

Citigroup is looking at options including a sale of parts of the company, or a merger with another company, a person familiar with the matter said on Thursday.

Concerns are rising that the drumbeat of negative news about Citigroup could prompt customers or trading partners to flee.

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8220;We worry if the lack of investor confidence leads to a lack of customer confidence,8221; wrote Barclays Capital analyst Jason Goldberg. 8220;We believe the market may be implying some sort of regulatory intervention.8221;

Within the last three months, major US lenders Wachovia and Washington Mutual suffered rapid outflows of deposits, as losses mounted on mortgages and other debt. Wachovia later agreed to be bought by Wells Fargo, while WaMu failed and its assets were bought by JPMorgan.

Earlier this week, Pandit set plans to shed 52,000 of Citigroup8217;s 3,52,000 jobs by early 2009, and to move tens of billions of dollars in troubled securities onto its balance sheet.

The bank is also pushing the US Securities and Exchange Commission to reinstitute a temporary ban on short sales of financial stocks, a person familiar with the matter said.

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The cost to protect its debt was 4,70,000 annually to protect 10 million of debt against default for five years, up from 3,95,000 annually on Thursday, according to Phoenix Partners Group.

Citigroup8217;s market value was 25.7 billion as of Thursday8217;s close, down 48.7 billion this month, and down about a quarter trillion dollars since late 2006.

Thursday8217;s market value was barely above the 25-billion that Citigroup received as part of the government8217;s 700-billion financial industry rescue package. Citigroup said it has also raised another 50 billion of capital from other investors since the middle of 2007.