The Financial Times claims sources at the firm - once the world's biggest bank - believe the move will see over $600 billion (Â£412 billion) in assets and divisions moved to a "non core unit".
This unit would report its results separately from the rest of the group and, once the market recovers, would either be sold off or spun out.
Citigroup's investment banking division would remain part of the core business, albeit with reduced operations and capital as the group looks to cut risk and stabilize earnings.
Sources at the firm said chief executive Vikram Pandit believes the company needs to move away from its "financial supermarket" model after it was left badly exposed to the collapse of the sub-prime mortgage market and in need of a $300 billion bailout from the US government.
In related news, Citigroup has confirmed that it will merge its Smith Barney brokerage with Morgan Stanley.