Citigroup shares drop; CEO plans to keep Smith Barney

By Dan Wilchins and Jonathan Stempel

NEW YORK (Reuters) - Citigroup Inc Chief Executive Vikram Pandit tried to downplay speculation the banking giant might sell major businesses to restore its health and investor confidence, but shares still tumbled for a fifth straight day.

Pandit told employees on Friday that the second-largest U.S. bank by assets does not want to change its business model and plans to keep its Smith Barney brokerage, according to two people who heard him.

He also said Citigroup had a solid capital position, and that employees should not focus on the bank's falling share price because that is not what regulators and credit rating agencies worry about, the people said.

Citigroup's board is meeting Friday to discuss the bank's options, a person familiar with the matter said.

The shares closed down 94 cents, or 20 percent, at $3.77, after earlier tumbling as low as $3.05. They closed at $9.52 a week ago.

Citigroup's market value fell to $20.5 billion on Friday. That's less than the $25 billion taxpayer-funded injection that Citigroup just received from the federal government, and a fraction of the $75 billion of capital that Citigroup has raised since the credit crisis began last year. The bank's market value topped $270 billion in late 2006.

"It's fear and panic at this point," said Gerard Cassidy, a banking analyst at RBC Capital Markets in Portland, Maine. "Investors have seen similar movies this year, and the endings are very unpleasant."

The cost to protect Citigroup debt against default rose, suggesting that fixed-income investors see increased risk.  Continued...