….is to sell assets. Citigroup has cut its dividend, raised billions from new stock offerings and preferred placements to foreign wealth funds, but they’re likely sitting on billions more of credit losses, depending on how the residential and commercial real estate markets perform. And credit losses will continue to be a hit to earnings (and capital) as the bank is forced to maintain higher than average credit loss provisions over the next few years.

All the losses are giving CEO Pandit cover to shed assets. It’s been clear for some time that the behemoth Sandy Weill built is totally bloated and not benefiting from “synergy.” The Travelers insurance business was spun off years ago. Now it’s time to shed more assets.

It will be interesting to hear details from the company’s analyst day.

Some early details from the WSJ:

Citigroup Inc. plans to wind down more than $400 billion in assets over the next two to three years as the financial-services giant moves to slim down under new Chief Executive Vikram Pandit.

The disclosure is part of the company’s presentation at its annual investor & analyst day.

Citi has recorded some $40 billion in write-downs the past three quarters amid the fallout from the credit crunch and seen credit costs surge amid increased delinquencies and charge-offs. As a result, the company has raised roughly $40 billion in new capital in recent months, including some $12 billion the past several weeks.

Citi said it had nearly $500 billion in so-called legacy assets as of the first quarter, nearly half of which being low-return. Nearly two-thirds is in consumer banking and one-third in securities and banking segment. The company plans to shed all those assets from securities and banking — excluding alternative investments — and more than 50% at consumer banking. The company plans to cut the amount to under $100 billion in two to three years.