NYML503

By MADLEN READ

AP Business Writer

NEW YORK (AP) - Citigroup Inc.'s new chief executive, Vikram Pandit, plans to stick with a global banking model after months of intense review - but only after shrinking the company by about one-fifth first.

The three-year game plan, revealed Friday, includes getting rid of more businesses, mortgages, real-estate operations and jobs.

The bank aims to shed between $400 billion and $500 billion of its $2.2 trillion in assets and grow revenue by 9 percent over the next few years as it tries to rebound from massive losses tied to deterioration in the credit markets.

The $500 billion in so-called "legacy assets" the bank intends to sell off or allow to mature include yet-to-be-named noncore businesses, as well as assets in Citigroup's securities and consumer banking segments. That includes mortgages and other real estate-related holdings.

Meanwhile, the anticipated rise in revenue will derive largely from cutting costs - which Chief Financial Officer Gary Crittenden said will mean more job reductions. Citi has so far lowered its headcount by 13,200 since last summer.

The moves could mean the bank loses its standing as the nation's largest if it doesn't grow other assets simultaneously. According to their most recent regulatory filings, Bank of America Corp. has $1.74 trillion in total assets, while JPMorgan Chase & Co. has $1.64 trillion.

The investor presentation Friday did not come as a huge surprise. Citigroup has already begun its winding-down process by writing down about $38 billion in soured debt since last summer, and setting plans to reduce its residential mortgage assets by $45 billion over the coming year. It has also sold businesses including CitiCapital, CitiStreet and Diners Club.

These moves arrived on top of huge stock sales to outside investors, including government funds in Singapore and the United Arab Emirates.

Roger Lister, chief credit officer for U.S. financial institutions at the bond rating company DBRS, said Citi should be able to find buyers for its assets, as most are not particularly risky, and instead are simply low revenue generators for the bank.

"The plan makes sense - in some ways, it's the easy part," Lister said.

While others agreed that Citi had to sell assets, not everyone was certain how easy such a sale would be.

"I'm not sure they have half a trillion in good assets that someone wants to buy. But they're doing the obvious - they have no choice," said R. Christopher Whalen, managing director of consulting firm Institutional Risk Analytics.

Either way, whether Pandit's plan proves successful will determine his legacy as a turnaround specialist for a company that many claim was struggling long before the housing market collapse.

Pandit joined Citigroup in July 2007, when it bought his hedge fund Old Lane. The board fast-tracked him to the CEO spot in December, five weeks after former CEO Charles Prince was forced out following the bank's dismal performance during the third quarter.

"This is going to be a difficult environment to judge success," said Lister, who worked at Citigroup during the late 1980s and early 1990s. "He has done what I think one would have expected of a dynamic, experienced business leader ... It's the execution that's going to be the challenge."

Citigroup has been under heavy investor scrutiny over the past year as the value of its stock tumbled. Many Citigroup holders have been angling for a large-scale overhaul of the company's structure. Those shareholders' hopes have dwindled, with executives saying they intend to keep the bank's major parts intact.

"We believe the right model is a global universal bank," Pandit said.

But Citigroup executives did point out several shortcomings at the bank that need to be fixed, including organizational redundancies, a fractured corporate culture and waning market share in U.S. retail banking. And the company introduced a new slogan as part of its revamping efforts: "Citi never sleeps."

But the road to recovery is going to be a difficult one.

Most analysts believe that while the bulk of the bank's write-downs are through, there are still at least some more to come. In a note Thursday, Deutsche Bank analyst Mike Mayo estimated that Citigroup's $29 billion bucket of mortgage investments and related structured products has the potential to result in another $15 billion write-down.

And given that Citigroup has $63 billion in exposure to home equity loans, $150 billion to mortgages, $21 billion to auto loans, and exposure to other loans such as credit cards, Mayo estimated that the bank will have to build up its reserves by an additional $5 billion as the U.S. consumer credit climate deteriorates.

Citigroup shares slipped 55 cents to $23.75 by late afternoon Friday. The stock is down about 18 percent in 2008 and 55 percent over the last 12 months.

AP Business Writer Stephen Bernard in New York contributed to this report.