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To: Cynic 2005 who wrote (9142)	10/21/1998 5:31:00 PM
From: Joseph G.	Read Replies (1) \| Respond to of 86076

<<NEW YORK, Oct 21 (Reuters) - Financial services giant Citigroup Inc. (NYSE:CCI - news) is cutting back on its bond trading business after volatile markets caught it by surprise and cost it dearly in the third quarter, said the firm's co-chief executive, Sandford ''Sandy'' Weill, on Wednesday. Weill made the comments in a brief telephone interview with Reuters, in which he also disclosed that the company will take an undetermined fourth-quarter restructuring charge to integrate several businesses. ''As far as the trading we do for our own account, we experienced volatility that was far beyond what we anticipated,'' Weill said. ''We are in the process of cutting back and have cut back substantially our risk and exposure in that area, and continue to do that.'' Citigroup, the result of a recent merger between banking giant Citicorp and financial services power Travelers Group Inc., earlier Wednesday posted a 53-percent drop in quarterly net income mostly because its Salomon Smith Barney securities unit bled red ink amid global financial turmoil. Salomon Smith Barney, itself formed by a 1997 merger between Travelers' retail brokerage Smith Barney and bond trading powerhouse Salomon Brothers, posted a $324.9 million loss after $1.3 billion in bond trading losses. The results compared with a profit of $508.4 million in the year-earlier quarter. Weill said Citigroup would not close its global arbitrage group, which trades bonds for the firm's account, after the company earlier cut the group's U.S. based arm. He also said Citigroup has not yet determined the size of the fourth-quarter charge, which had been expected by analysts. Weill, the former chief executive of Travelers, engineered the acquisition of Salomon last year. In a bid to take away investor worries about the wild swings in profits Salomon's trading produces, Weill has often said the company would reign in the risks Salomon traders take. Then events of the past summer, however, caught many financial professionals by surprise. As the financial turmoil intensified, investors dumped securities they perceived as too risky, such as emerging markets and corporate bonds, and bought U.S. Treasuries. This widened credit spreads between corporate bonds and U.S. Treasuries, depressing the value of corporate bonds. Securities firms like Salomon Smith Barney, which make a market in corporate bonds, had to mark down the value of their corporate bond holdings. They also suffered big losses on bets that the widening yield spreads would narrow again. Salomon's global arbitrage group, which put on trades betting on yield spreads narrowing, was hit especially hard, losing about $700 million. Weill, however, denied Citigroup would shut the group altogether, as it did with its U.S. arbitrage operations. ''Basically what we're are saying is that we're cutting back our exposures, the size of our positions, we're not getting out of the positions,'' Weill said. "We have the capital ... to keep them until more normal times. Weill said Salomon's customer business, which lost around $350 million over the summer, still represents one of Citigroup's great core-assets. ''We have been through some very unusual markets with tremendous drain of liquidity,'' Weill said. ''That business we plan to continue to grow on a global basis over time.'' Weill was silent on possible job cuts at the combined company, which employs around 160,000 worldwide. A Citicorp spokesman recently confirmed reports Citigroup may cut as many as 8,000, or five percent of the work force before year-end. Weill did say the company will take a restructuring charge in the fourth quarter, which analysts had expected. ''It's something that's in the making, and we will talk about before the end of the quarter,'' Weill said.>>