3 steps to break up the bank.
Citigroup should consider breaking itself into smaller pieces because higher capital rules make it difficult to earn acceptable returns, analysts at Keefe, Bruyette & Woods said.
Bloomberg News reports that a breakup could come in three steps: selling the international consumer businesses excluding Mexico; selling the Mexico franchise; splitting the remaining firm into a U.S. consumer business and a global corporate bank, KBW analysts led by Brian Kleinhanzl wrote in a note dated Sunday. The dismantling would deliver an estimated market value of $198bn, or 57% more than the current level, they wrote.
“One of the primary benefits of becoming smaller is escaping the vise that is the current regulatory environment,” the analysts said. Citigroup’s shares trade below tangible book value, a measure of the price the underlying assets would fetch in a sale, as they have “fairly consistently” since 2009, they said.
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