NEW YORK (Reuters) - Citigroup Inc, scrambling to survive losses triggered by the credit crunch, unveiled plans to split in two and shed troubled assets, and reported a quarterly loss of $8.29 billion.

A man speaks on a mobile phone outside Citibank's offices in the Canary Wharf district of London, January 16, 2009. REUTERS/Andrew Winning

The banking giant also said it expected more departures from its embattled board, which is losing former Treasury Secretary Robert Rubin as a director later this year.

Still, the bank’s shares rose 4 percent in premarket trading, in part because investors hoped the plan to separate its most troubled assets into a new company would help revive the company.

“It’s one of the first steps toward some positive news and the end of this nightmare,” said Michael Holland, founder of Holland & Co in New York, which manages more than $4 billion of investment.

Citigroup, whose shares have plunged 87 percent since the beginning of 2008, said it recorded $28.3 billion of writedowns and credit losses in the 2008 fourth quarter. Losses over the past 15 months total more than $92 billion.

The bank’s fourth-quarter loss was $8.29 billion, or $1.72 per share, compared with a year-earlier loss of $9.8 billion, or $1.99 a share. The most recent results included $3.9 billion of gains from the sale of it German retail bank.

BREAKING UP

Citigroup, once the champion of the “financial supermarket” model, is splitting into two operating units in what is known as a “good bank/bad bank” strategy. Critics of the bank, who argue it had become too big and complex to manage, have demanded a break-up for some time.

Citigroup’s core commercial, retail and investment banking worldwide -- the good bank -- will be reorganized as Citicorp and led by Citigroup Chief Executive Vikram Pandit.

The other unit -- to be called Citi Holdings -- will encompass brokerage, retail asset management, consumer finance and a pool of risky assets. The bank is considering selling off Citi Holdings assets, or letting them mature.

The bank said it was searching for someone to run Citi Holdings.

The break-up plan comes three days after Citigroup announced plans to sell its Smith Barney brokerage business to Morgan Stanley. Initially, Citigroup will own 49 percent of a venture comprising the brokerages of both banks. Morgan is expected to acquire full control after five years.

Citigroup will receive $2.7 billion upfront from Morgan as part of the deal, expected to close in the third quarter.

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DEPRESSED RESULTS

Citigroup’s fourth-quarter revenue fell 13 percent to $5.6 billion, reflecting weak capital markets. It global credit card business saw revenue decline 27 percent on weakness in North America.

Consumer banking revenue declined 22 percent, driven by a 47 percent drop in investment sales. Its institutional clients group, securities and banking revenue was negative $10.6 billion, mainly due to net losses and writedowns of $7.8 billion.

“Our results continued to be depressed by an unprecedented dislocation in capital markets and a weak economy,” said Pandit.

Citigroup said its Tier 1 capital ratio, a measure of financial strength, stood at 11.8 percent at year-end, well above the level required by regulators.

The bank has sold $45 billion of preferred stock to the Treasury as part of the government’s effort to prevent the collapse of U.S. banks.

Citigroup also disclosed it was reviewing goodwill on its balance sheet to determine if it should record an impairment. Goodwill, the difference between what a company pays for an acquisition and its value, must be written down if a company believes the value of the acquired business will not recover.

Matt McCormick, portfolio manager at Bahl & Gaynor Investment Counsel in Cincinnati, said of the quarterly results, “I think people knew it was going to be bad, but I’m surprised it’s this bad.”