Financial News Online

Citigroup is cutting residential mortgage assets by $45bn (ˆ29bn) and costs by $200m at the same time that Merrill Lynch discontinues origination at First Franklin, a sub-prime mortgage company the bank bought two years ago.

Officials at Citigroup said in a statement that they will reduce the assets in its US mortgage business by a fifth from December 2007 levels and will cut the amount of new loans to be held in the portfolio by more than half over the coming year.

In addition, the company will integrate middle office and support areas and consolidate operations, policies and procedures in its US mortgage business under CitiMortgage. The bank expects to cut costs by $200m within 12 months.

Bill Beckmann, president of CitiMortgage, said: “These changes will enable us to manage the business unit's capital for enhanced returns.'

Going forward, markets and banking will have a significant role in shaping CitiMortgage's products, as well as its pricing and distribution activities.

Citigroup shares fell sharply this week in response to a prediction by the head of a Dubai-owned investment firm that previous capital-raising efforts by Citigroup were not enough to sustain the company through turbulent economic conditions and continuing credit turmoil.

The bank has raised more than $26bn over the past three months from sovereign investors in the Middle East and Asia, as well as from the public due to more than $20bn in credit-related losses.

The Wall Street Journal reported Citigroup executives are confident with the company's capital levels and are not looking to raise additional funds from outside investors, according to people familiar with the matter.

Yesterday Merrill Lynch said it was discontinuing mortgage origination at its First Franklin subsidiary in the US and will explore the sale of Home Loan Services, a mortgage loan servicing unit for First Franklin, because of the deterioration of the sub-prime lending market.

Wealth-bulletin.com

Credit woes have rocked global stock markets in recent months, shaking up the ranking of billionaires on the annual list published by US business magazine Forbes. Some investors managed to squeeze profit from the disaster, but most saw their luck turn for the worse as they rode too close to the sub-prime waves.

This list profiles the credit crunch billionaires, according to Forbes:

Prince Alwaleed, Saudi Arabia, $21bn (ˆ13.7bn)

Fortune increased

Citigroup's largest shareholder joined the Singapore government in a $12.5bn capital injection for the US bank earlier this year. It wasn't the first time the prince has helped prop up the institution - he saw Citi through a rough spot in the early 1990s as well.

Joe Lewis, UK, $3bn

Fortune increased

This reclusive currency trader made big news in 2007 when he plunked down $1bn for a 9.4% stake in Bear Stearns. That stake is now worth just $880m, but the British billionaire, who started off in his family's catering business, has plenty of other assets propping him up.

John Paulson, US, $3bn

New billionaire

Paulson was the managing director of mergers and acquisitions at Bear Stearns before founding his own hedge fund Paulson & Co. By short-selling subprime credit, he tripled his little-known fund's assets to $21bn last year, and brought his own net worth up to $3bn. Paulson - no relation to the US Treasury secretary - remains bearish on housing and has enlisted Alan Greenspan as an adviser.

Hank Greenberg, US, $1.9bn

Fortune decreased

Chairman and chief executive of American International Group until 2005, Greenberg still holds 13 million shares of the insurance giant. His fortune, estimated at $1.9bn, is down from $2.8bn late last year, in no small part because of AIG's struggling stock price.

Sanford Weill, US, $1.4bn

Fortune decreased

Weill started as a runner for Bear Stearns in 1955. By 1983, he had become president of American Express. He created the insurance giant Travelers Group and merged it with Citicorp, where he would later do a stint as CEO. When Citi stock tanked, Weill's net worth dropped from $1.8bn in late 2007 to $1.4bn today.

Marc Ladreit de Lacharriere, France, $1.1bn

Fortune decreased

The French billionaire is the chief executive of Imalac, parent company of Fitch ratings. He is also a board member at L'Oréal, where he spent 15 years of his career. Irked investors and skeptical regulators have plagued Fitch ever since the subprime meltdown put it and other credit rating agencies in the hot seat. Ladreit lost half his fortune in the past year.

James Cayne, US, $950m

Billionaire dropoff

Cayne stepped down as Bear Stearns chief executive in January after holding the top job since 1983. Still the chairman of the board, Cayne's dwindling fortune no longer qualifies him for Forbes' billionaires list. His 4.9% stake plummeted in value as Bear's stock more than halved from its 52-week high of $159.

Richard Fuld, US, $920m

Billionaire dropoff

Fuld is the chairman and chief executive of Lehman Brothers, where he began his career in 1969. He has seen Lehman stock price swing up and down - but mostly down - as the investment bank weathers the credit crunch. His fortune, which includes 2.1 million shares of the company, is down from $1.2bn at the time Forbes published its ranking of the 400 Richest Americans last September, to a recent $920m.

Financial News Online

Robeco Investment Management has agreed to sell its US municipal fixed-income business to Lehman Brothers as the asset manager nears the completion of plans to exit from its US fixed income market.

A Robeco spokesman confirmed the agreement but declined to elaborate or disclose the terms of the deal. A spokesman for Lehman Brothers declined further comment.

Last Friday, Robeco and Morgan Stanley announced that Morgan Stanley would assume $4.8bn (ˆ3.1bn) in assets under management from Robeco’s taxable fixed-income business.

Robeco said at the time that it was also negotiating the sale of its $1.5bn municipal, or tax-free, fixed income business, which is what Lehman Brothers has agreed to purchase.

After the deal closes, Lehman’s asset management division will have a total of about $17.5bn in municipal fixed-income assets under management.

Robeco Investment Management is the US asset manager of the Netherlands-based Robeco Groep, which is owned by Rabobank.

In a statement last week, Robeco said that it was leaving the US fixed-income market because 'sufficient scale was not achieved to provide a platform for significant long-term growth.”

Robeco plans to focus its fixed-income efforts on Europe, where it has fixed-income portfolios that total $60bn.

The transaction will also pave the way for Robeco to move forward with plans to focus its US business exclusively on investments in equities and alternative assets, which Robeco officials said represents $18bn in client assets.

Putnam Lovell served as Robeco’s advisor on its deals with both Morgan Stanley and Lehman Brothers.