Citigroup has some serious fixing to do

Citigroup's headquarters in London.

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KAI RYSSDAL: Those guys on Wall Street like to do all kinds of complicated things. Tricky structured finance investments that most of us just can't figure out. Former Citigroup CEO Charles Prince will have plenty of time to figure out what went wrong. But here's one that the group now running the country's biggest bank will have to figure out. What to do about actual banking. Our New York bureau chief Jill Barshay reports.


JILL BARSHAY: Both Moody's and Fitch downgraded Citigroup debt today. That was after Citi said it might have to swallow another $11 billion in mortgage bond losses. Joe Scott is a senior director at Fitch Ratings. He says Citi's retail customers shouldn't worry.

JOE SCOTT: I don't think anything's really changed from a retail perspective. This primarily revolves around capital markets' charges and because we think they're manageable, I don't see any direct effect on the retail operations.

Some investors say Citigroup moved into too many other businesses, like investment banking and insurance. New management might decide to split the financial giant up. Citi was planning to expand its retail division. It's the biggest bank in the country, but it has only 1,000 U.S. branches. Bank of America is five times the size.

David Wagstaff of PA consulting group works with the banking sector. He says domestic expansion is probably off the table.

DAVID WAGSTAFF: But there are a number of things that are happening in the marketplace which may have them rethink their strategy of national growth. Opening branches is becoming relatively more expensive as it's tougher to gain consumers.

Retail banking in the U.S. is a slow growth area. But Scott of Fitch ratings doesn't expect Citi to ditch its domestic retail business any time soon. He says most of the bank's future expansion will happen abroad, in emerging markets or in countries where people save more.

In New York, I'm Jill Barshay for Marketplace.

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