Pandit: Tough call

New York, Nov. 21 (Reuters): Citigroup Inc shares tumbled for a fifth straight day, as chief executive Vikram Pandit tried to downplay speculation the banking giant might sell major businesses to restore its health and investor confidence.

Pandit told employees on Friday that Citigroup, the second-largest US bank by assets, would not like to change its business model and planned to keep its Smith Barney brokerage, according to two people who heard him.

He also said Citigroup had a solid capital position, and that employees should not focus on the bank’s falling share price because that was not what regulators and credit rating agencies worry about.

In late-morning trading, the shares were down 85 cents, or 18 per cent, at $3.86, after earlier tumbling as much as 24 per cent to $3.58. They closed at $9.52 a week ago.

The cost to protect Citigroup debt against default rose, suggesting that fixed-income investors see increased risk.

“It’s fear and panic at this point,” said Gerard Cassidy, a banking analyst at RBC Capital Markets in Portland, Maine. “Investors have seen similar movies this year, and the endings are very unpleasant.”

Citigroup is looking at options, including a sale of parts of the company, or a merger with another company, a person familiar with the matter said on Thursday.

Concerns are rising that the drumbeat of negative news about Citigroup can prompt customers or trading partners to flee.

“We worry if the lack of investor confidence leads to a lack of customer confidence,” wrote Barclays Capital analyst Jason Goldberg. “We believe the market may be implying some sort of regulatory intervention.”

Within the last three months, major US lenders Wachovia Corp and Washington Mutual Inc suffered rapid outflows of deposits, as losses mounted on mortgages and other debt. Wachovia later agreed to be bought by Wells Fargo, while Washington Mutual failed and its assets were bought by JPMorgan Chase.

Earlier this week, Pandit set plans to shed 52,000 of Citigroup’s 3,52,000 jobs by early 2009, and to move tens of billions of dollars in troubled securities onto its balance sheet.

The bank is also pushing the US Securities and Exchange Commission to renew a temporary ban on the short sales of financial stocks, a person familiar with the matter said.