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Citigroup's New Year's Resolutions

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Citigroup's New Year's Resolutions
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Citigroup Inc (NYSE: C) is getting an early start on its 2015 New Year’s resolutions: trim down the balance sheet, pass the CCAR, and continue to reduce operational risk. The company has made lots of noise recently, shuffling its business and books to eliminate past problems and position itself for a bright future.

A handful of recent transactions are the latest in the metamorphosis of Citigroup from the pre-crisis bloated megabank with the bad balance sheet to the smaller, streamlined Citigroup of the future.

Determined Not To Make The Same Mistake Twice

Citigroup took a hard blow in 2014 when its capital return plan was rejected by the Federal Reserve.

Related Link: Ron Insana's U.S. Economic Outlook For 2015

Morgan Stanley analysts believe that Citi can’t and won’t risk another rejection in 2015. They believe that Citi will continue to focus on getting rid of its subprime lending business, reducing risky international positions, boosting capital ratios and cutting expenses.

Recent Transactions

Three recent moves by Citigroup suggest that the company is still actively adjusting its business. As Morgan Stanley analysts predicted, Citigroup recently sold two of its international positions. Citi reached a deal with The Bank of Nova Scotia (NYSE: BNS) for Citigroup to turn over its commercial banking operations in Peru.

In addition, Citi will be selling its retail banking operations in Japan to Sumitomo Mitsui Financial Group Inc (NYSE: SMFG) in a deal that is expected to close in 2015.

It's Not Just About Selling

Citigroup’s balance sheet makeover is not only about selling. Citigroup recently purchased Credit Suisse Group AG’s (NYSE: CS) commodities business. Citigroup will be taking over Credit Suisse’s trading of base and precious metals, freight, coal, iron ore, crude oil, oil products and U.S. and European natural gas.

Overall, Citigroup’s efforts to eliminate risky units from its operations have reduced the total assets on the company’s balance sheet from $2.2 billion at the end of 2007 to about $1.9 billion at the end of 2013.

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