yard sale on bank assets

--In a sign that they see tough times ahead, U.S. and European banks are considering sales of everything from branches to entire units. Possible sellers include Citigroup Inc., which may unload or shut several midsize units, and United Kingdom banking giant HSBC Holdings PLC, which could exit all or parts of its $13 billion auto-finance business, say people familiar with the situation. --Talk of the potential moves comes days after Merrill Lynch & Co. announced that it would sell most of its commercial-lending business to General Electric Co. for $1.3 billion. Morgan Stanley pocketed more than $250 million last month by selling a slice of its MSCI Inc. investment-analysis unit in a public offering. --For one, asset sales generate immediate cash at a time when banks are likely to face persistent difficulties borrowing money. --Other sources of money, such as the market for short-term IOUs known as commercial paper, remain frozen or prohibitively expensive. --Also, the sales allow banks to replenish their capital levels -- a measure of their ability to absorb sudden losses -- without resorting to such draconian steps as slashing dividend payments to shareholders. --In recent weeks, several of the world's largest banks -- including Citigroup, Merrill Lynch, UBS AG and Morgan Stanley -- have sold multibillion-dollar stakes to Asian and Middle Eastern investors to boost their capital amid heavy losses on mortgage investments. But as banks increasingly take responsibility for assets that had been held in off-balance sheet funds such as structured investment vehicles, or SIVs, their capital needs have grown. --In a report this month, Goldman Sachs estimated that $475 billion of "extra" assets had been moved to bank balance sheets since the credit crunch picked up speed earlier this year. --Citigroup has been struggling to boost a capital ratio that stood at 7.3% as of the end of September, below the bank's internal target of 7.5%. Last month, the bank turned to the Abu Dhabi Investment Authority for a $7.5 billion capital injection. It has also agreed to take direct responsibility for $49 billion in SIV assets. The bank has stopped purchasing its own shares, and has warned of as much as $11 billion in fourth-quarter losses. Analysts expect it could be more: Goldman analyst William Tanona, for example, now estimates the write-down will rise to $18.7 billion in the fourth quarter. --HSBC doesn't face the same capital pressures as Citigroup. But Mr. McDonagh has shut or discontinued several U.S. businesses, including Decision One Mortgage, which operated as a middleman in the subprime-lending industry. And as Chairman Stephen Green and CEO Michael Geoghegan focus more on growth in emerging markets, more U.S. businesses could face the cut, particularly those that benefit little from being part of a bigger bank, says Alastair Ryan, a bank analyst at UBS.