Citigroup is in the midst of some large-scale organizational changes, so the move to separate the credit card unit from the rest of consumer banking may not seem to be such a big deal.
But this change could be a precursor to a sale or public offering. Citi has a very solid card business and it may be forced to sell some crown jewels if writedowns continue. Like many forced sales, any disposal of the credit card operations would take place at or near the worst point in the cycle, when both earnings and multiples would be low.
Citigroup Inc., battling to restore credibility after a record loss, will set up an independent credit-card unit and overhaul consumer banking along geographical lines, two people with direct knowledge of the plan said.
Steven Freiberg, the current co-head of consumer banking, will run the card unit, the people said, asking not to be identified before an announcement that may come as early as today. The rest of the consumer group, mainly bank branches and non-bank lending, will be led by five regional heads, the people said….
Profit at Citigroup’s consumer unit fell 35 percent last year to $7.87 billion as rising delinquencies on mortgages and auto loans forced the bank to set aside more reserves for losses.