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Pressure builds on Citigroup to sell part or all of itself as stock falls below $4 a share
NEW YORK (AP) -- Pressure intensified on Citigroup to sell part or all of itself as its stock fell below $4 a share on Friday and fears escalated about future loan losses.
CEO Vikram Pandit told managers earlier in the day he opposes breaking up the company, but the bank's board of directors was meeting Friday to discuss whether to do exactly that, the Wall Street Journal reported.
What investors are worried about is that all the risky debt sitting on Citigroup's balance sheet will eventually turn into losses as the economy worsens and the markets stay turbulent -- losses that could be nearly impossible to reverse.
Investors were also fearful that the government might orchestrate a takeover of Citigroup over the weekend that could wipe out common shareholders, said Paul Miller, a Friedman Billings Ramsey banking analyst.
The government was instrumental in JPMorgan Chase & Co.'s buyout of Bear Stearns and Washington Mutual Inc., deals that left shareholders with little or no payouts.
The Treasury Department, the Federal Reserve and other banking regulators are monitoring the situation, government officials said. They spoke on condition of anonymity because of the sensitive nature of the matter.
Concerns about the solvency of financial institutions were starting to ebb after the downfall earlier in the year of Bear Stearns Cos., Lehman Brothers Holdings Inc., and American International Group Inc. But now they are back with a vengeance as the recession deepens, raising the prospects of even more massive loan losses.
Just a couple months ago, Citigroup was the largest bank in the world by assets, stretching into everything from credit cards to consumer banking to high-stakes corporate dealmaking. The company was the result of an idea spawned by the financial deregulation in the late 1990s -- that consumers and corporations alike would be better served by a bank that could meet all of their needs.
Almost from the start, though, investors complained Citigroup was too sprawling and too complex to manage properly. And when the subprime mortgage crisis ripped through Wall Street starting last year, Citigroup was hit especially hard because of its high exposure to bad debt. Now, it has failed to turn a profit during the past four quarters, and its shares are trading for less than the cost of a pint of beer at a Wall Street pub.
As a result, analysts consider Citigroup the most vulnerable among the major U.S. banks -- especially after it failed to nab Wachovia Corp., bought instead by Wells Fargo & Co., a missed opportunity that put Citi behind in the race for U.S. deposits.
Citigroup's shares tumbled as low as $3.05 a share Friday before recovering to close at $3.77 a share, a decline of 20 percent that left them at their lowest level in nearly 16 years. It was a continuation of a sharp, weeklong plunge that could not be stemmed by Saudi investor Prince Alwaleed bin Talal's decision Thursday to raise his stake in the company to 5 percent from less than 4 percent.
The shares have shed 60 percent of their value since last Friday.
Citigroup has already raised $75 billion in capital this year, including a $25 billion cash investment from the government -- and none of it has been enough to muster confidence.
Raising more money on the open market is "pretty much off the table," given the recent plunge in the bank's shares, said William Fitzpatrick, an equity analyst at Optique Capital Management Inc. And raising more cash from outside investors or the government would be "a Band-Aid."
"You're going to have to see more sizable divestitures," Fitzpatrick said. "They're going to have to make changes here, and they don't have time on their side anymore."
People familiar with CEO Pandit's call Friday morning with senior managers, who spoke anonymously because the comments during the call were not made public, said his message was similar to that at his town hall meeting with employees on Monday -- that Citigroup has adequate capital, and that he supports the universal bank model for Citigroup, including arms such as Smith Barney.
On Monday, Pandit said the universal banking model is "the right model," and that Citigroup's strategy is "to be the world's truly global universal bank."
Still, one person said, "it's clear everything is on the table. That wasn't explicit, but I think it's clear."
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Pressure builds on Citigroup to sell part or all of itself as stock falls below $4 a share
NEW YORK (AP) -- Pressure intensified on Citigroup to sell part or all of itself as its stock fell below $4 a share on Friday and fears escalated about future loan losses.
CEO Vikram Pandit told managers earlier in the day he opposes breaking up the company, but the bank's board of directors was meeting Friday to discuss whether to do exactly that, the Wall Street Journal reported.
What investors are worried about is that all the risky debt sitting on Citigroup's balance sheet will eventually turn into losses as the economy worsens and the markets stay turbulent -- losses that could be nearly impossible to reverse.
Investors were also fearful that the government might orchestrate a takeover of Citigroup over the weekend that could wipe out common shareholders, said Paul Miller, a Friedman Billings Ramsey banking analyst.
The government was instrumental in JPMorgan Chase & Co.'s buyout of Bear Stearns and Washington Mutual Inc., deals that left shareholders with little or no payouts.
The Treasury Department, the Federal Reserve and other banking regulators are monitoring the situation, government officials said. They spoke on condition of anonymity because of the sensitive nature of the matter.
Concerns about the solvency of financial institutions were starting to ebb after the downfall earlier in the year of Bear Stearns Cos., Lehman Brothers Holdings Inc., and American International Group Inc. But now they are back with a vengeance as the recession deepens, raising the prospects of even more massive loan losses.
Just a couple months ago, Citigroup was the largest bank in the world by assets, stretching into everything from credit cards to consumer banking to high-stakes corporate dealmaking. The company was the result of an idea spawned by the financial deregulation in the late 1990s -- that consumers and corporations alike would be better served by a bank that could meet all of their needs.
Almost from the start, though, investors complained Citigroup was too sprawling and too complex to manage properly. And when the subprime mortgage crisis ripped through Wall Street starting last year, Citigroup was hit especially hard because of its high exposure to bad debt. Now, it has failed to turn a profit during the past four quarters, and its shares are trading for less than the cost of a pint of beer at a Wall Street pub.
As a result, analysts consider Citigroup the most vulnerable among the major U.S. banks -- especially after it failed to nab Wachovia Corp., bought instead by Wells Fargo & Co., a missed opportunity that put Citi behind in the race for U.S. deposits.
Citigroup's shares tumbled as low as $3.05 a share Friday before recovering to close at $3.77 a share, a decline of 20 percent that left them at their lowest level in nearly 16 years. It was a continuation of a sharp, weeklong plunge that could not be stemmed by Saudi investor Prince Alwaleed bin Talal's decision Thursday to raise his stake in the company to 5 percent from less than 4 percent.
The shares have shed 60 percent of their value since last Friday.
Citigroup has already raised $75 billion in capital this year, including a $25 billion cash investment from the government -- and none of it has been enough to muster confidence.
Raising more money on the open market is "pretty much off the table," given the recent plunge in the bank's shares, said William Fitzpatrick, an equity analyst at Optique Capital Management Inc. And raising more cash from outside investors or the government would be "a Band-Aid."
"You're going to have to see more sizable divestitures," Fitzpatrick said. "They're going to have to make changes here, and they don't have time on their side anymore."
People familiar with CEO Pandit's call Friday morning with senior managers, who spoke anonymously because the comments during the call were not made public, said his message was similar to that at his town hall meeting with employees on Monday -- that Citigroup has adequate capital, and that he supports the universal bank model for Citigroup, including arms such as Smith Barney.
On Monday, Pandit said the universal banking model is "the right model," and that Citigroup's strategy is "to be the world's truly global universal bank."
Still, one person said, "it's clear everything is on the table. That wasn't explicit, but I think it's clear."
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basic accounting functions
basic accounting 101
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automated accounting and
accounting terms non
accounting sample balance
accounting term revenue
basic governmental accounting
accrual accounting definition
balance sheet wiki
balance worksheet
accounts receivable worksheet
accounting standard setters
accounting review guidelines
balance sheet tutorial
bay accounting and tax
accounting research
best accounting system
asb accounting standards
balance sheet pdf
business accounting application
behavioral research in accounting
based accounting inventory
accounting supplies
budgeting
apic accounting definition
automated message accounting
business accounting review
american accounting services
accounting period cycle
accounting term and
accounting profit equals
accounting services florida
av accounting services
an accounting loss
accounting worksheet templates
accounting web
accounting payroll time clock software
accounts worksheets
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accounting programs in the
