No Bueno, Citigroup

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Most of Citigroup's (NYSE: C) press releases, earnings reports, conference calls, and investor presentations over the past year have said something along the lines of, "Yeah, the U.S. is a black hole. But our international units are killing it! Profits galore!"

This, we're told, is Citi's niche in the banking world: A truly global bank. And international banking is supposed to be where all the fun is. "We are seeing further confirmation of signs [of] improvement in our international markets, but challenges remain in the U.S.," said CEO Vikram Pandit last week.

Which makes it all the more agonizing to hear Citigroup might have to shed one of its cherished international divisions: the Mexican banking unit, Banamex.

According to The Financial Times, the Mexican government is honing in on a law that prohibits state-owned banks from operating in Mexico. Since Citigroup is now officially more than 30% owned by U.S. taxpayers, it could fall squarely under that rule, meaning the Citigroup mothership may have to ditch Banamex.

Citigroup doesn't break out Banamex results, but the Financial Times suggests that it makes up as much as 15% of Citigroup's profits, and could be worth upward of $20 billion in a sale.

This, though, presents two problems:

• The need to sell assets was 2008's problem. Citigroup has plenty of spare capital now (thanks to taxpayers). What it needs now are assets that produce profits -- assets like Banamex.
• Saying that a division might be worth $20 billion means nothing, especially when the government is orchestrating the matter. Citi just sold its commodities trading unit to Occidental Petroleum (NYSE: OXY) for $250 million, or just over one-tenth the $2 billion some suggested it was worth. Getting a fair price can be quite difficult when anxious regulators are prodding you to move along.

When the banking world caved in last year, plenty warned of zombie banks: those that could be kept alive by government support, but remain comatose from an unviable business model. As banks like Goldman Sachs (NYSE: GS), Wells Fargo (NYSE: WFC), and JPMorgan Chase (NYSE: JPM) rebound sharply and have well-defined niches, we have to ask: Is Citigroup already stuck in a zombie world?

You tell me. Fire away in the comment section below.