Earlier this year, Citigroup (NYSE:C) sold 51% of its crown jewel asset-management business, Smith Barney, to Morgan Stanley (NYSE:MS).

At the time, the deal made sense. Citi desperately needed capital, and a relatively riskless asset like Smith Barney could still fetch a reasonable price -- as opposed to financial assets, many of which couldn't have been sold at all.

Yet even as market liquidity comes roaring back, CEO Vikram Pandit now says Citi will likely eventually sell its remaining 49% stake to Morgan Stanley.

Smith Barney is one of Citi's only stable, consistently profitable, and still-promising assets. Over the past few years, wealth management has been one of the only firm contributors to the bank's bottom line:


2008 Net Income

2007 Net Income


($954 million)

($1.6 billion)

Global Cards

$166 million

$4.7 billion

Consumer Banking

($12.3 billion)

$2.2 billion

Institutional Clients

($20.1 billion)

($4.2 billion)

Wealth Managmenent

$1.1 billion

$2 billion

Wealth management was never a big contributor, but it nonetheless contributed in good times and bad. You'd think a rickety bank like Citigroup would want that kind of stability. Just last November, Pandit himself remarked: "I have got no desire to sell Smith Barney. I love that business."

Other banks love it, too. Not only did Morgan Stanley rush for Smith Barney earlier this year, but Bank of America (NYSE:BAC) nearly killed itself getting its hands on Merrill Lynch, and Wells Fargo (NYSE:WFC) now has huge exposure to wealth managmenent thanks to the Wachovia acquisition. It's a good, profitable, low-risk, minimal-capital business that's bound to thrive in the future.

Citigroup is clearly struggling to find a direction. Or a profitable direction, at least. It's on a mission to become a slimmer, more focused bank known as Citicorp, but it's unclear how that niche will fit against stronger banks such as JPMorgan Chase (NYSE:JPM).

And, really, all shareholders care about after the past two bloody years is profit. The wisdom of shedding one of Citi's last profitable units remains to be seen.

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Fool contributor Morgan Housel doesn't own shares in any of the companies mentioned in this article. The Fool has a disclosure policy.