It didn't work for Genghis Khan, Napoleon, or the Third Reich, and now it's not working for Citigroup (NYSE:C), either. I'm not talking about tyrannical ruling, I'm talking about a quest for global domination.

So after a decade of trying to become a supermarket financial center with its hands in everything from investment banking in San Francisco to cash management in Sri Lanka, it's time for Citigroup to give up its journey and break itself apart.

Participant of everything, leader of nothing
It all started back in 1998, when Travelers Corp. merged with banking giant Citicorp to form a financial behemoth containing everything from checking accounts and car insurance to investment banking and derivatives trading. If you could monetize it, Citi wanted a piece of it.

But that grandiose strategy didn't materialize as planned. Conglomerates of all types can run into problems when one segment doesn't complement the others. For example, Altria Group (NYSE:MO) came to terms with this when it spun off Kraft (NYSE:KFT) and Philip Morris International (NYSE:PM) to free them from the chains of slow-growing sibling Philip Morris USA. As Citi trudged along over the past decade, costs ballooned, its structure became convoluted, and, perhaps most importantly, analysts and investors sat back and scratched their heads over what to make of the bumbling behemoth that didn't seem to have a strategy other than "get huge."  

As it stands, Citi can be dissected into three parts: wealth management, consumer banking, and markets and investment banking. This isn't the entire business, but it represents the major working parts.

Here's the net income of those three divisions for the past three years:

Division

2007

2006

2005

Prospects

Wealth management

$2 billion

$1.4 billion

$1.2 billion

Good

Consumer banking

$7.9 billion

$12.0 billion

$10.9 billion

Respectable

Markets and investment banking

($5.2 billion)

$7.1 billion

$6.9 billion

Teardrops on my pillowcase     

How much could it sell these divisions for?
I don't know. The market for bank assets right now is about as robust as the market for wool sweaters in the desert. The average net income over the past three years for the divisions comes out to $1.5 billion, $10.2 billion, and $2.9 billion, respectively. Assuming you could get 10 times the average of three years net income, you come up with a number around $146 billion, or about 37% higher than Citi is currently trading for. Yes, I do realize this is the mother of all back-of-the-envelope calculations that excludes factors such as pending writedowns, but stay with me here.

Looking at the divisions above, it's clear that Citi has some terrible assets (markets and investment banking) and some fantastic ones as well. Wealth management, for example, is a growing segment that continues to propel banks such as Bank of America (NYSE:BAC) and JPMorgan Chase (NYSE:JPM). If the choice assets could be freed from their wayward siblings, is it possible they could flourish on their own? Absolutely. And doing so could end up being a boon to shareholders and help put some of this credit mess behind us.

How so? Well, take Citi's recent quarterly earnings. Losses came in at $2.5 billion, with pre-tax writeoffs of $7.2 billion. What percentage of the writeoffs was related to wealth management? None. Zilch. Nonetheless, wealth management still has to be attached to the 60% share-price decline Citi has endured in the past year. Yes, financial services in general are grisly right now, but the ugliest parts are contained to certain areas. Remove the golden children from the problem areas, and some parts are actually quite good.

Huge conglomerates prosper in only a few exceptional cases. Berkshire Hathaway (NYSE:BRK-B) has done extremely well with everything from car insurance to beer and ice cream, but, of course, it did so under the leadership and talent of Warren Buffett. Citi's management team has undergone a whirlwind shakeup in recent years and is currently headed by former hedge-fund manager Vikram Pandit. If you're wondering how Pandit has done as a leader of other major banks, you're out of luck. This is his first time leading a bank. That alone is probably grounds for major changes.  

Foolish bottom line
A Citigroup breakup isn't very likely, especially during this sour market. CFO Gary Crittenden recently stated, "We really don't have any intention to split up the various elements of the banks, and so it's just not an issue that we're focused on at all." If by "we" he means shareholders looking to maximize value, I'd say he's a bit mistaken.

For related Foolishness:

Kraft Foods, JPMorgan Chase, and Bank of America are Motley Fool Income Investor recommendations. Berkshire is a Motley Fool Inside Value selection and a Motley Fool Stock Advisor pick. The Fool owns shares of Berkshire. Try any of our Foolish newsletter services free for 30 days.

 Fool contributor Morgan Housel owns shares of Berkshire, Altria, and Philip Morris International. The Fool has a disclosure policy.