Citigroup Plans to Shutter Proprietary Unit After Rout in Equity Trading

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Citigroup Inc. (C), the third-biggest U.S. lender, said it’s closing a proprietary-trading unit that incurred losses in the third quarter, as regulators prepare to restrict banks from making bets with shareholder cash.

The company is almost “two-thirds done” winding down the Equity Principal Strategies unit, Chief Financial Officer John Gerspach said yesterday in a conference call with analysts. Market turmoil caused a revenue decline for the unit, which suffered losses as it exited trading positions, Gerspach said.

Chief Executive Officer Vikram Pandit, 54, is shutting the business as lawmakers draft the so-called Volcker rule, which aims to restrict banks from making bets with shareholder money. Other firms including Goldman Sachs Group Inc. (GS) and Morgan Stanley (MS) already have exited similar businesses. New York-based Citigroup partly blamed Equity Principal Strategies for a 73 percent slump in third-quarter revenue from equities-trading.

“Equity Principal Strategies is a de minimis part of Citi’s overall trading operation,” Danielle Romero-Apsilos, a spokeswoman, said in an e-mailed statement. “As it does not fit with Citi’s business model under the impending Volcker rule, it is in the process of being wound down.”

http://www.bloomberg.com/news/2011-10-17/citigroup-plans-to-shutter-proprietary-unit-after-rout-in-equity-trading.html