It’s official: Salomon Brothers has been completely picked apart.

Citigroup’s agreement to sell Phibro, its profitable but controversial commodity trading business, to Occidental Petroleum today puts the finishing touches on a slow erosion of a once-dominant bond trading and investment banking firm.

When Sandy Weill (pictured left) staged his 1998 coup – combining Citicorp and Travelers, Salomon Brothers was a strong albeit humbled investment banking and trading force. Yet little by little, a succession of financial crises, Wall Street fashion and regulatory intervention has whittled away at the once-dominant firm.

Not long after the Citigroup was formed, proprietary fixed income trading –  once the domain of John Meriwether, was shut down after the Asian debt crisis fueled losses that Weill could not stomach.

The Salomon name disappeared long ago as investment bankers and underwriters were rebranded Citigroup Global Markets.

Now Phibro, the former Philips Brothers that merged with Salomon in the early 1980s, is to be cast off because its energy traders made too much money when the rest of the bank suffered losses and required a $45 billion of taxpayer bailout.

Occidental Petroleum is buying Citi’s commodities trading unit Phibro for roughly its net asset value. How much that is, exactly, is hard to tell. Occidental said its net investment in Phibro is expected to be about $250 million.

The bigger figure, of course, is the $100 million associated with star trader Andrew Hall. His pay package has been the subject of much hand-wringing at Citi and in Washington.

Phibro’s management team, headed by Hall, and its employees will remain with the unit after the sale, expected to close by year-end. Citigroup shares were fractionally lower in morning trading on the New York Stock Exchange, while Occidental shares were up about 1 percent.

The problem, as many pundits are pointing out, is that Phibro is a profitable business, and Citi needs funds to repay a $45 billion government bailout. Like so many asset sales put together by institutions on the government drip — AIG in particular — the golden eggs tend to sell better than the rotten ones.

On a quiet day for deals, worth noting that Royal Bank of Canada joins the growing queue of prospective buyers of a wealth management business. Read the exclusive Reuters story here. On a larger scale, Wynn Macau’s strong debut in Hong Kong ups the ante for Europe, where bookbuilding for the IPO of Poland’s PGE starts next week. For more deal-related news from Reuters, click here.

Elsewhere:

* The U.S. Federal Deposit Insurance Corp is questioning the positive conclusions given to Citigroup Inc’s management team in a government-mandated review in the aftermath of the financial crisis, the Wall Street Journal says.

* A management buyout of Malaysia’s national carmaker Proton Holdings could be possible, the firm’s chairman was quoted as saying in the Star newspaper.

For asset managers, the shedding season seems to have no end in sight.

More asset management units of financial institutions are likely to find their way into the market in the months ahead, as they look to separate distribution from product creation, Jefferies & Co’s financial institution group predicts. 

More than two-thirds of global asset management deal activity came from such divestitures in the third quarter, a record level in a three-month period, Jefferies said.

These included deals such as Bank of America’s agreement to sell the long-term asset management business of Columbia Management to Ameriprise, Bank of New York Mellon’s acquisition of Insight Investment from Lloyds, and the purchase by Sumitomo Trust & Banking of Citigroup’s 64 percent interest in Nikko Asset Management. 

“As larger financial institutions refocus on strategic strengths, we expect they will continue to separate asset management distribution from manufacturing,” said Aaron Dorr, a managing director.

There were 38 deals in the third quarter, down from  66 in the same period last year, but disclosed deal value climbed to $4.5 billion from $4.2 billion and managed assets transacted rose to $749 billion from $728 billion, Jefferies said.

Julius Baer will buy ING’s private bank in Switzerland, the two have said (Reuters has long been reporting that Baer was the frontrunner to seal the deal).

The battle for Dutch retailer Super de Boer heats up, with Ahold now showing interest to buy 30 to 50 of its supermarkets. For these and other stories about deals, click here.

And two deal stories in other media:

Citigroup is working on a sale of its commodities unit Phibro in a move that could raise hundreds of millions of dollars, according to the Financial Times.

HSBC would be forced to delay raising its dividend if new capital rules are applied too heavily or too quickly, The Times reports the bank’s head of investment banking as saying.

Is pay Czar Kenneth Feinberg going to name and shame?

At a speech yesterday in Washington, Feinberg said he planned to disclose the pay for the top 25 employees at Wall Street firms within the next 30 days, according to a research note by Jaret Seiberg, of Concept Capital. Seiberg saw Feinberg’s talk.

But it is not clear if names would be redacted from that disclosure, with perhaps only titles and salaries revealed.

Feinberg is charged with examining pay packages at companies that received government bailout money, including Citigroup <C.N> and American International Group Inc. <AIG.N>

Feinberg yesterday also indicated that he would like his work as pay czar to have staying power, according to Seiberg’s note, but it would be up to other regulators to “ultimately decide how broadly” his policies apply.

Seiberg also noted that Feinberg “seemed very uncomfortable” about using his power to claw back compensation already paid. But he also sugested egregious examples may warrant recoupment.

Did Citi sell something? All signs point to yes, but beyond that it’s hard to say.

Citigroup announced on Monday that it sold three credit card portfolios representing $1.3 billion in managed assets as part of a plan to unload weak businesses and troubled assets. The third-largest U.S. bank by assets did not disclose the terms of the deals, but said it will continue to service the portfolios through the first half of 2010.

Or, as New York Times chief financial correspondent Floyd Norris said as he bemoaned the lack of transparency from the taxpayer-funded bank:

I can’t remember a deal announcement when a company said it had sold undisclosed assets to an undisclosed buyer for an undisclosed price, resulting in an undisclosed profit or loss.

HSBC, perhaps the most Chinese of the big European banks, says it is in talks to set up an investment banking joint venture in China. Australia and New Zealand Bank and Asia-focused Standard Chartered have lined up opportunistic buys in Asia, picking up the pieces of imploded RBS. Even beaten-down Citigroup is talking about acquisitions … in Indonesia.

ANZ said it agreed to pay a smaller-than-expected $550 million to buy some Asian units from RBS. StanChart, just nine months after launching a 1.8 billion pound rights issue, unveiled a surprise 1 billion pound ($1.7 billion) share placement to give it firepower to grasp opportunities as Asia’s economies recover. The bank said it was in talks about small acquisitions in China and India likely to cost between $100 million and $200 million. We’re told those talks involve RBS assets.

HSBC’s move would allow it to expand into China’s domestic securities and debt markets, areas it is presumably well-placed to exploit, given its dominant role in Hong Kong finance. Asia chief Vincent Cheng said HSBC Hong Kong has enough capital for acquisitions, has looked into some RBS Asian assets but has found, in general, that Asian assets are too expensive. So it will focus on organic growth.

Bank of America-Merrill Lynch said just days ago it was moving to boost its position in China with the hiring of veteran banker Wang Bing to head its corporate finance business there. Last week, we reported that Bank of America planned to set up a wholly owned subsidiary in China to bolster its corporate, investment banking and wealth management businesses.

Since Asia’s biggest asset is its position as manufacturing base for the world, the banks’ moves can be seen as a leading indicator of confidence in recovery. Or they could just be bold bets.

(Corrects spelling of Al-Braikan in third paragraph.)

Citi continues to refuse to discuss its 10 percent stake Al Raya Investment, four days after the Kuwaiti firm’s chief executive was found dead.

A New York-based spokeswoman for Citi declined to discuss how the investment came to be, what due diligence was done before the investment was made, and what the Citi plans to due with its stake in the embattled firm.

Al Raya chief executive Hazem Al-Braikan was found dead in an apparent suicide on Sunday after a whirlwind week in which he and two other finance firms were accused by the U.S. Securities and Exchange Commission of having improperly earning millions of dollars from trades in two U.S. firms.

Al-Braikan seemed to be at the top of his career just a year ago, Reuters correspondent Ulf Laessing reported earlier this week.

Last summer, Al-Braikan hosted then chairman of Citigroup Sir Winfried Bischoff, who was visiting Kuwait soon after Citi bought 10 percent of Al Raya. Al-Braikan lunched with Bischoff and even took him to meet Kuwait’s ruler.

Earlier this week, Bischoff refused to talk about Citi’s investment in Al Raya during an interview with Reuters correspondent Steve Slater.

“You have to ask Citigroup on that,” Bischoff said.

But we did and they were no more forthcoming.

(Photo: REUTERS/Lucas Jackson)

An almost heart-warming effort is being mustered by CIT bondholders to keep the troubled lender from getting put under the TARP or stumbling into a much-anticipated bankruptcy. Some $3 billion in survival cash is seen in the pipeline — money that could strengthen CIT’s finances and allow it more time for a debt restructuring. An announcement is expected before the markets open this morning.

What kind of terms might bondholders extract from CIT? Before TARP was modified to target executive pay for those who sought its shelter, banks such as Citigroup and then-independent investment house Merrill Lynch paid what were seen as shockingly high terms on mandatory convertible debt. They were the kind of rates Citi customers paid on credit cards; nothing like traditional bank funding rates.

So, a CIT deal could, and perhaps should, come with a variety of stringent terms. If these are effectively passed on to desperate small and medium-sized businesses that CIT serves, the cost of this rescue could be blamed for stifling the recovery.