IRVINE, Calif. — Along with the layoffs and cost cutting unveiled last week by Citigroup Inc. came rumors that the company’s Smith Barney brokerage unit was destined for a spinoff.
But Robert Druskin, chief operating officer of New York-based Citigroup, told the Public Broadcasting Services’ “Nightly Business Report” last Wednesday that a sale of Smith Barney is not on the table.
“We think that the company’s comprised of a number of different businesses, and our challenge is to get them to work better together, which we’re moving ahead with full steam,” he said. “There’s no plans to sell any major pieces of the company.”
A Smith Barney insider confirmed: “Smith Barney isn’t going anywhere.”
The source, who asked not to be identified, said that the bank wants its businesses to work together more closely.
A sale “just wouldn’t make sense,” said a Smith Barney rep, who also asked not to be identified. “We’re one of most profitable sides of Citigroup.”
Still, Citigroup executives clearly need to take drastic action to lift a stock price that has gone nowhere for five years.
“If you had to pick one thing for Citigroup to divest, Smith Barney would be it,” said Ryan Barnes, an analyst who contributes to 247wallst.com, a website that comments on stocks.
Time may be of the essence, with top Smith Barney brokers jumping ship because they’re tired of waiting for a turnaround at Citigroup. Rick Peterson, a recruiter who specializes in stockbrokers, said that about 600 of the firm’s top producers have left for such competitors as Morgan Stanley and UBS Financial Services Inc. in the past six months. Many are being tempted with enormous pay packages, including bonuses equal to 200% of their past year’s production, double the traditional rate.
Indeed, another rep at Smith Barney said that she is “skeptical” of the firm’s denial of a possible sale.
This broker, a veteran who’s been through the many mergers in Smith Barney’s history, said that senior management always denies sale rumors prior to a deal.
As part of the Citigroup restructuring, Smith Barney will close 43 branch locations, many of them in the Southeast.
About 30 brokers were let go, as well as another 80 non-producers.
Dan Jamieson can be reached at
[email protected]. Aaron Elstein, a senior reporter for Crain’s New York Business, contributed to this story.
