Citigroup dumps Phibro

NEW YORK (AP) — Citigroup Inc. is removing one of the irritants in its relationship with the government, its Phibro commodities trading division that is paying one trader an estimated $100 million this year.

The deal announced Friday carries a tradeoff for Citigroup: While the $250 million sale to Occidental Petroleum Corp. means a bit less government scrutiny, it also means the bank is losing hundreds of millions of dollars in annual income that could help repay $49 billion in bailout money.

Phibro, which makes most of its money through oil and natural gas trades, earned an average $371 million annually during the past five years. Citigroup sold it for about $250 million, which means Occidental could recoup its investment in less than a year.

A Citigroup official with knowledge of the deal said the bank wanted to dispose of Phibro by the end of the year.

The official, who spoke on condition of anonymity because she wasn’t authorized to discuss the deal publicly, said Citigroup considered Phibro a “political hot potato” that would hurt the company despite its financial success.

Occidental Petroleum spokesman Richard S. Kline said Citigroup approached Occidental about a month ago, seeking a buyer for Phibro.

“There obviously was some pressure from the government to do this,” Kline said. Noting that Citigroup sold Phibro for a relatively small amount, he said, “if they had liquidated the business, they would get about what we’re paying.”