Citigroup’s – ‘Bad Bank’ a Surprise Success

Don’t look now, but Citi Holdings, the “bad bank” Citigroup created to dispose of unwanted assets, has logged four profitable quarters in a row


By Christina Rexrode
Aug. 12, 2015 6:03 p.m. ET

Citi Holdings was born to be bad. But it is getting better with age.

The “bad-bank” unit of Citigroup Citigroup Inc., Citi Holdings for more than six years has been the repository for businesses the banking giant wanted to dump: its retail brokerage and life insurance unit, an array of toxic subprime loans, even a stake in a Mexican auto supplier.

Now, after years of losses, the unit has reported four profitable quarters in a row. It also has sold more than $700 billion in assets, an amount that rivals the balance sheets of Goldman Sachs Group Inc. and Morgan Stanley.

“We’re out of the dark tunnel,” says Francesco Vannid’Archirafi, the executive who has run the unit since 2013.

Citi Holdings was born out of the detritus that was Citigroup after the financial crisis. Then-CEO Vikram Pandit moved about $900 billion worth of businesses and loans into the unit, a combination of assets that were either toxic, underperforming or simply no longer fit Citigroup’s business model. The idea was to sell them or let them run off, while allowing Citigroup to focus investor attention on its core businesses and acquiesce to government pressure to get smaller and less risky.

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