Toxic Assets? What Toxic Assets?

It's always interesting to see how a company spins bad news [1] to its investors and clients.

Citibank, which trades at under $3 a share as we speak and has just announced [2] that it is, errr, trimming it's once-rich dividend to a mere 1 cent, has certainly had a rough time [3] recently. That $45 billion in taxpayer bailout funds and $300 billion in additional federal guarantees it recently devoured hasn't stopped the hemorrhaging on its balance sheet; and there is concern it could continue its string of multi-billion dollar writedowns [4] on assets that one might be forgiven for calling something else. 

Interestingly, what Citi now calls them is "non-core assets" with "attractive long-term prospects" that, unfortunately, may "compete for [the bank's] resources." The full letter sent out to Citi's private banking clients following the news that it was spinning off these "assets" is printed below.

Clients taking the letter at face value might want to nab a piece of the repository -- Citi Holdings -- for themselves. Of course, if these assets were valuable, one might think Citi would keep them on the books itself.

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Dear Client:

While you have likely read about the organizational developments here at Citi, I'd like to briefly touch on the highlights with you and underscore our commitment to you as a client of Citi Private Bank.

Citi will realign into two businesses, Citicorp and Citi Holdings. Citicorp will be a relationship-focused global bank for businesses and consumers. It will have worldwide deposit-taking capabilities that can be put to work with consumer and institutional customers in a diversified way, giving it a unique ability to serve global clients locally and local clients globally. This structure will enable Citi to focus on driving the performance of its core businesses and to realize value from its non-core assets. Citicorp will consist of two main entities: the Retail Bank and the Global Institutional Bank, which includes the Private Bank and the Corporate and Investment Bank. We anticipate that Citicorp will have assets of approximately $1.1 trillion and will be approximately 65 percent deposit funded.

Citi Holdings will be a group of non-core businesses that have strong market positions and attractive long-term prospects. However, they do not sufficiently enhance the capabilities of Citi's core business, and in many ways compete for its resources.

For clients of Citi Private Bank, including our pre-eminent Law Firm Group business, one thing will not change: our commitment to you and your financial success. The organizational developments will in no way compromise the unmatched advice and high-quality services you have come to expect from us.

As always, and especially during these times of change, we look forward to speaking with you and welcome any questions you may have.

Sincerely,