Citigroup (NYSE: C), the mammoth banking giant created by Sandy Weill is starting to look vastly different than it was even just a few years ago. The firm once stood as the beacon of a new era in banking, where a single firm would perform every service and individual, business, or government would need. All of that has changed now, leaving many to wonder what the future holds for the firm, and what it will look like as we move forward.
At the height of the financial crisis during the fourth quarter of 2008, Citi entered into an era of a new strategy. Rather than embracing the supermarket model of having hundreds of divisions in seemingly every line of business, the bank has been trimming it’s operations and turning it’s focus onto the core business. Glass Steagall may not be back, but it’s a lot closer than the late 1990’s.
StepStone Group completed a deal with Citi to take on the bank’s $4 billion fund of funds, mezzanine funds, feeder funds and co-investment businesses. In the same deal, Lexington Partners has acquired a portion of Citigroup’s proprietary interests in the same unit. The deal was announced in July. The transaction allows Citigroup to reduce its private equity assets by $1.1 billion. Citigroup continues to shed assets as it tries to trim it’s balance sheet and right size the firm. The challenges are high for Vikram Pandit and his team, and investors are clamoring for returns after seeing their ownership diluted through multiple government infusions during the past two years. The management team has a clear focus and plan for improvement, something that was seemingly lacking during the Prince era.
To be compliant with the new Dodd Frank legislation on financial reform, many other large U.S. banks are also selling off or preparing to sell off alternative investment divisions prior to the Volcker Rule going into effect.
