Rescue ahead for Citigroup?

The U.S. Government probably will probably rescue Citigroup Inc., which is struggling through a crisis in confidence that erased half its stock-market value in three days, investors and analysts said Friday.

Citigroup has more than $2 trillion of assets, dwarfing companies such as American International Group Inc. that received U.S. support earlier this year. Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben S. Bernanke may favor a rescue to avoid the chaotic aftermath of Lehman Brothers Holdings Inc.'s bankruptcy in September.

"There is no question that Citi is in the category of 'too big to fail,'" said Michael Holland, chairman and founder of Holland & Co. in New York, which oversees $4 billion. "There is a commitment from this administration and the next to do what it takes to save Citi."

While Citigroup executives say the company has adequate capital and liquidity to ride out the crisis, its tumbling share price may shake the confidence of creditors, clients and rating agencies. A similar scenario played out at Lehman, when Chief Executive Officer Richard Fuld declared the firm was "on the right track" five days before the firm went bankrupt.

"The market may be implying some sort of regulatory intervention," Jason Goldberg, a former Lehman analyst who now works at Barclays Capital in New York, wrote in a note to clients Friday. "In situations where the government has stepped in, the equity holders have not fared well."

Citigroup CEO Vikram Pandit told employees Friday that he doesn't plan to break up the company, aiming to reassure workers as the stock resumed its skid. Citigroup shares dropped 94 cents, or 20 percent, to $3.77 at 4:08 p.m. in New York, giving the company a market value of about $21 billion.

Pandit and Chief Financial Officer Gary Crittenden, speaking on a worldwide conference call Friday morning, also said they don't expect to sell the Smith Barney brokerage unit, according to two people who listened to the call and declined to be identified because it wasn't open to the public.

The call came as Citigroup's board, led by Chairman Win Bischoff and independent director Richard Parsons, prepared to meet at the bank's headquarters in New York, said a person familiar with the company's plans who declined to be identified because the deliberations are private. Bischoff declined to comment on any potential changes to the board.

Once the biggest U.S. bank, with a market value of $274 billion at the end of 2006, Citigroup has now slipped to No. 5 behind Minneapolis-based U.S. Bancorp. A plan by 51-year-old Pandit this week to cut costs by shedding 52,000 jobs and an endorsement by billionaire Saudi investor Prince Alwaleed bin Talal didn't assuage shareholders' concern that bad loans and securities write downs may extend a yearlong run of net losses totaling $20 billion.