According to an internal memo sent Tuesday by Citigroup's global equities head James A. Forese, the company is restructuring its investment bank following last week's announcement of $8B to $11B in additional subprime losses (full story) after reporting a 57% Q3 profit decline on Oct. 15. The investment banking division will be split into two platforms, origination and sales, with the former consisting of debt and equity underwriting, and the latter integrating product sales and relationship-management to form an investor client group. In the memo, Forese said, "During the last several months, our firm and industry have faced enormous challenges. We have decided to adopt a model that will more closely align our origination and sales functions across traditional product categories." In a note to clients, a Bear Stearns analyst commented there is no guarantee there won't be further fallout, but he said the memo "suggests that Citigroup is moving rapidly to address the problems that surfaced" as a result of the deteriorating credit market. Separately, Citigroup and Nikko Cordial have amended their share swap deal planned for January, to reflect the recent drop in Citi's shares and protect Nikko shareholders. Shares of Citigroup jumped 6.9% to $35.90 in a broad market rally Tuesday. Citi was up slightly at $36.00 in thin pre-market trading.
Commentary: Citigroup Is a Long Term Value Opportunity - Barron's • Impossible To Pass Up Citigroup • Who Should Be Citigroup's Next CEO?
Stocks to watch: C, OTC:NIKOY. Competitors: BAC, JPM, HBC
Earnings call transcript: Citigroup Business Update, Citigroup Q3 2007