New York: Citigroup Inc chief executive officer Vikram Pandit said he plans to shed about $400 billion of assets over the next three years as part of his plan to return the biggest US bank to profitability.

“There will be more” divestitures, Pandit, 51, told shareholders at a meeting on Friday at the bank’s New York headquarters. The company, which lost $5.1 billion in the first quarter, has recorded more than $40 billion of credit losses and writedowns since the subprime mortgage market collapsed last year.

“They need to pare back the parts that are broken,” said Barry James, who manages more than $2 billion as president of James Investment Research in Xenia, Ohio, including Citigroup bonds. “He’s a cautious guy. He’s not going to do anything rash.”

Pandit, who succeeded Charles O “Chuck” Prince in December, has already announced plans that would reduce the bank’s $2.2 trillion of assets by at least $65 billion, according to Susan Roth Katzke at Credit Suisse Group. Last week, he agreed to sell employee-benefit joint venture CitiStreet LLC. In April, the bank opted to sell the Diners Club International credit-card payment network and CitiCapital, a provider of leases and financing for industries including health care and construction.

The bank is also poised to dispose of more than $200 billion of loans and securities to shore up capital, a person with knowledge of the plan said March 24. Pandit will probably let them pay off as they come due, rather than sell them at a loss, the person said.

The stakes may include $49 billion of securities the bank had to take on when it bailed out seven off-balance-sheet investment funds.

Under Prince, Citigroup’s assets increased by $689 billion from 2005 through 2007, an amount larger than the entire balance sheet of Wells Fargo & Co, the fifth-biggest US bank. Prince, 58, was forced to resign last November as the bank headed for a record fourth-quarter loss of almost $10 billion.

Selling assets that aren’t trading at depressed prices would bolster Citigroup’s so-called Tier 1 capital, the core measure of solvency demanded by regulators.

Under US rules, banks have to set aside sufficient Tier 1 capital, which includes common stock and retained earnings, to provide a cushion that a bank would have to burn through before investors in Tier 2 capital - mostly subordinated debt - or depositors would suffer losses.

“He’s carting off the non-significant operations and raising money so that he can reinvest it in the business he’s in, which is loaning money,” said Robert Olstein, chief investment officer of Purchase, New York-based Olstein Capital Management, which owns Citigroup shares.

Pandit has raised $44 billion in capital, more than any financialservices company, through stock sales and private offerings to investment funds controlled by foreign governments including Abu Dhabi.

Pandit told investors on Friday that he expects to deliver return on equity, a gauge of how effectively the bank reinvests earnings, of 18% to 20% “over time”.

The firm produced a return of 19.4% on average from 2001 through 2006. The measure plunged to 3% last year.

He has already changed managers, putting former Morgan Stanley colleague John Havens in charge of trading and investment banking, moving US onsumer head Steve Freiberg to head a new credit-card division.

Source : DNA