Sallie Mae

Is Citigroup finally off the ropes?

September 21, 2010: 10:04 AM ET

A deal late last week to sell its student loan portfolio brings the value of Citigroup's "bad bank" down by half. Will Vikram Pandit emerge as the victor?Citigroup

by Kit R. Roane, contributor

Citigroup's revelation last Friday that it finally found buyers for its troubled student loan business was good news to investors betting on a turnaround. But finding a home for the roughly $480 billion in remaining troubled assets on the bank's balance sheet may be no easy task.

"The low-hanging fruit has obviously been dealt with," notes Harlan Platt, a finance professor at Northeastern University, adding that many of the assets held in Citi Holdings, otherwise known as "the bad bank" have been marketed on and off for about a year "with virtually no bidders."

Last week's deal removes about $40 billion of student loans from Citigroup's troubled asset unit and shifts the former financial bazaar a bit closer toward CEO Vikram Pandit's dream of a slimmed-down behemoth that does banking, but little else. It also signals a welcome relaxation in the financial markets, which have seen a notable increase in mergers and acquisitions, and a general willingness to take on more risk.

It's encouraging that Citigroup (C) made progress with its student loans. For a long time, Citi couldn't even give them away. But time -- and extraordinarily low interest rates -- apparently cures all ills. More

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