Citigroup?s plan to profit from growth in foreign markets may put CEO Vikram Pandit at odds with the US government?s stated interest in curbing risk and stoking the domestic economy with loans.

The Treasury is poised to become Citigroup?s biggest shareholder with a 34% stake under a referred-stock conversion, so Pandit may have a hard time selling his plan. With a stock below $3 and analysts forecasting the bank will post a second-quarter operating loss, it probably isn?t the time to focus overseas, said Matt McCormick, a money manager at Bahl & Gaynor Inc in Cincinnati. ?It sounds great on paper to have foreign operations and revenue streams,? said McCormick, whose firm oversees $2.2 billion. ?But Joe Six-pack is going to look at this and say, ?Why in the world aren?t we focused on something that?s going to benefit the US taxpayer directly???

Pandit?s focus on emerging markets might not sit well with Federal Deposit Insurance Corp chairman Sheila Bair, who has questioned Pandit?s leadership and wants the bank to reduce risks by selling off businesses, including some overseas. Citigroup relies on the FDIC to support more than $60 billion of debt under a government programme set up last year to help banks refinance their obligations. The FDIC also guarantees much of the bank?s $298 billion of US deposits.

Josef Ackermann, CEO of Frankfurt-based Deutsche Bank AG, has said he resisted accepting a bailout from the German government to avoid having to retrench. ?If taxpayers feel they own your company, they will understandably ask for different setups and say, ?You should lend more money to us here in the domestic market instead of growing

internationally,?? Ackermann said.

The company is ?a beast that nobody seems to know how to control and going back 30 years has repeatedly been at the forefront of massive losses around the world,? said Simon Johnson, a professor of entrepreneurship at MIT?s Sloan School of Management. ?If I build a company that has great benefits to the country but also great potential or actual costs, those things have to be weighed.? Citigroup executives believe being in many

countries helps reduce the risks from any one.

Pandit has shrunk a balance sheet that ballooned to $2.4 trillion by 23% and has sold 23 businesses, including units in Germany and Japan, since he took over. The bank has 309,000 employees in more than 100 countries from Argentina to Zambia, including consumer banks in Mexico, Poland and South Korea acquired earlier this decade for a combined $16 billion under former CEOs Prince and Sanford Weill. Businesses outside the US and Canada accounted for 74% of Citigroup?s revenue last year, up from 53% in 2007, as most of the bank?s trading losses came in the US. Deposits outside the US accounted for 61% of the $762.7 billion total as of March 31. Pandit shifted non-bank consumer finance and brokerage units that he intends to sell or wind down to a new division called Citi Holdings in January. Also included is a trove of $301 billion of troubled assets that caused the bulk of the writedowns over the past year. The remaining businesses, grouped under the name Citicorp, got about two-thirds of their $60.6 billion in total revenue from outside the US and Canada last year.

Citigroup can?t afford to repay its bailout funds partly because it was ordered to bolster its capital base by the Fed in May. Other peers, including JPMorgan Chase, Goldman Sachs and Morgan Stanley, all based in New York, paid back the government last month. Bank of America Corp and San Francisco-based Wells Fargo, unable to repay bailout funds, haven?t had to cede an equity stake to the Treasury.

Pandit survived the showdown with Bair because he retains the support of other regulators and government officials, including Treasury Secretary Timothy Geithner and Comptroller of the Currency John Dugan. Geithner believes that Pandit should be given more time for his turnaround strategy to work and that there may be no one else capable and willing to step into the role.