Citi examines break up of German business

By John O'Donnell and Philipp Halstrick

FRANKFURT (Reuters) - Citigroup (C.N) is eyeing a sale of its retail business in Germany as part of a global reorganisation of the loss-making U.S. group, sources familiar with the matter have told Reuters.

Citi's retail business in Germany, which makes most of its money from loans for everything from televisions to cars, contributed nearly 3 percent of the bank's global pretax profit in 2006 before the market ructions of last year.

It is the centrepiece of the bank's business in Europe and any break up could signal a change in direction for the largest U.S. bank and global financial services powerhouse.

Although it is profitable, Citi's German retail business -- Citibank -- has been struggling with fierce competition and falling profits and is a prime candidate for divestment.

Citibank in Germany saw its pretax profit slide 17 percent in the first six months of 2007 to 264 million euros (211 million pounds), continuing the sharp decline seen in recent years.

The group's U.S. consumer lending business has had more serious difficulties and tumbled to a loss of more than $600 million (304.2 million pounds) last year compared with a profit of $1.9 billion in 2006 as the world's largest economy wobbled.

"If the price is right, Citibank (in Germany) could be sold," said one source familiar with the matter. "Everyone (in the business) is under pressure. There is an ongoing review everywhere and there are no sacred cows."

Citi's investment bank, which is active in Europe's biggest economy but far smaller than the retail bank, is unlikely to be sold.