Summit told Citi may not be profitable for several years

The transition for Wall Street Banks, Goldman Sachs and Morgan Stanley to bank holding companies, will be "painful", Oppenheimer & Co analyst Meredith Whitney told Reuters Global Finance Summit held in New York, London and Hong Kong recently.

Whitney also said that Citi, which was one of the casualties of the subprime crisis, was unlikely to be profitable for several years and needed to reinvent itself, either by buying another US retail bank or losing some of its businesses.

While Citi's Global Transaction Banking business continues to be profitable, Whitney said that opportunities for cross-selling to clients across Citi's myriad financial services businesses, was not happening because the bank had not invested enough in "integrating different units' computer and risk management systems".

She also stated that losses in the bank's consumer loans business in emerging markets such as Mexico and India were rising and that an accounting rule change would bring credit card loans packaged into bonds back onto Citigroup's balance sheet forcing the bank to set aside an additional $7 billion to $10 billion to cover loan losses, Reuters Global Finance Summit reported.

Citi lost its bid for Wachovia Bank, the US's fourth-largest bank by market value, to Wells Fargo in early October. The deal would have helped to increase its deposit base, which is considered crucial in these credit challenged times. Reuters Global Finance Summit reported that Citigroup relied more on borrowing in the bond market than competitors, particularly in the US, which increased its funding costs.

"If they want to grow their US business, they're going to have to fund it differently," Whitney told the Finance Summit.

Having lost the Wachovia deal, Citi is believed to be seeking other acquisitions.