Financial major Citigroup (NYSE:C) is weighing options on a possible sale of Phibro, its controversial energy-trading unit, The Financial Times reported Wednesday, citing people close to the situation. The move could raise hundreds of millions of dollars for the bailed-out bank, and mute political and public criticism over its star trader Andrew Hall, who is contractually entitled to a 2009 pay package of $100 million.
According to FT, Citi’s executives — whose preference from the beginning has been that of a complete divestment of the commodity trading unit as opposed to divesting part of the division, opening it to outside investors or spinning it off — have held talks with potential buyers. Insiders however, warn no deal is imminent and the plan could still fail.
If that turns out to be the case, notes FT, Citigroup is still considering selling a majority stake in Phibro, which has been one of the bank’s most profitable businesses, while retaining a minority interest for a few years. Citi relies on Phibro for a portion of its bottom line. The division reportedly contributed $2 billion to the bank’s profits over the past five years.
“As we have said previously, we are evaluating the best way forward for all stakeholders and are exploring several potential options,” Citigroup spokeswoman Danielle Romero-Apsilos said when asked about the FT report.
People close to the situation however, told FT the desire to quash the compensation controversy was in fact one of the reasons why the bank’s management favored a sale.