quote:

Citigroup's cost cuts may not bring 09 profit

By Dan Wilchins - Analysis

NEW YORK (Reuters) - Heads may be rolling at Citigroup Inc (C.N: Quote, Profile, Research, Stock Buzz), but that won't necessarily stop the red ink from flowing next year.

The bank said earlier Monday it expects to shed 52,000 jobs by early 2009 to cut costs as global economies slow. But if the company's credit losses are big enough, they may overwhelm any savings from cost cutting.

"Performance will be determined by how big credit losses are," Bill Fitzpatrick, equity research analyst for financial stocks at Optique Capital Management in Milwaukee, said Monday. Optique does not own Citigroup shares.

"They're taking the right steps, but you need a more benign economic environment before the company and the stock price recovers," Fitzpatrick said.

It is easy to imagine Citigroup losing money in 2009 for the second straight year.

The bank is trying to scale its balance sheet down to roughly its size in 2005 and 2006.

If it were to generate about $85 billion in revenue in 2009, similar to levels of a few years ago, and expenses were no more than the $50 billion to $52 billion it is aiming for, it could face losses if it had to set aside at least $35 billion for the year to cover loan losses.

That amounts to $8.75 billion a quarter, which Citigroup could easily surpass after setting aside $9 billion in the third quarter of this year. It is widely believed that economies worldwide deteriorated markedly in October and early November, and reserves for loan losses could increase quickly.

"Commercial loans, emerging markets loans, credit card loans, they're all under pressure," said James Ellman, president of hedge fund Seacliff Capital in San Francisco.

PROFIT SCENARIO

Citigroup may be able to turn a profit in next year's third and fourth quarters, particularly if the economy starts to stabilize or recover.

The bank has recorded higher loss reserves relative to loans than many of its peers, including JPMorgan Chase & Co (JPM.N: Quote, Profile, Research, Stock Buzz), which means it may not have to set aside money for losses as aggressively as it has done this year.

Veteran banking analyst Charles Peabody sees Citigroup setting aside about $20 billion for credit losses next year, with the biggest hit in the first quarter.

Citigroup's biggest U.S. credit exposure by far is in the housing market, Peabody said. If that market stabilizes, the effect of credit deterioration in other markets will look comparatively small.

The bank's share price may decline further in the near term, but could double in 12 to 18 months, assuming the company can generate $2 of profit per share a year, and shares trade at about 10 times their earnings, he added.

"It's a very compelling value," Peabody said.

Citigroup stock fell 63 cents, or 6.6 percent, to $8.89 on the New York Stock Exchange on Monday.

Wall Street analysts, on average, expect Citigroup to earn $1.05 a share before items next year, according to Reuters Estimates.

But analysts cautioned that predicting the outlook for any bank is difficult, and 2009 may be a grim year for Citigroup.

"Citi is not out of the woods yet," Optique's Fitzpatrick said.

(Editing by Jeffrey Benkoe)

quote:

Citi’s Leverage
November 17, 2008 – 12:36 pm

by Rolfe Winkler, CFA

More from Citi’s investor presentation…

There are plenty of slides talking about “Tier 1 Capital” and such. I never understood those ratios and don’t think they’ll be worth much in a panic situation as banks lose access to hard funding sources like consumer deposits. Using Citi’s Tier 1 Capital ratio of 10.4% would imply a leverage ratio of 100/10.4 = 9.6x.

But we know from the cases of Fannie and Freddie that regulatory capital ratios are very squishy…

Back out worthless assets from the bank’s equity calculation and the denominator decreases very suddenly. So in Fannie’s case, you had $2.5 trillion of assets versus ~$45 billion of “capital,” which implied a leverage ratio over 50x. And yet that “capital” figure included at least $21 billion of deferred tax assets that Fannie wrote down to $0 in the most recent quarter. (see this previous post on Fannie to understand why DTAs are worthless).

The reality is, intangible assets like deferred tax assets should NOT be included when calculating leverage ratios. Excluding those meant Fannie had a leverage ratio of 100:1! When assets are 100x larger than equity, it takes only a tiny reduction in assets to reduce equity to zero. And with house prices likely to fall more than 30% nationally, asset values are falling more than just a little. This is why Fannie has already said they’ll need more than the $100 billion promised by Treasury.

Leverage ratios are important because they tell you how much money is in reserve to cover losses. That’s why you shouldn’t include faux assets like intangibles, deferred tax assets and goodwill. These things are worthless in a bankruptcy court. They can’t be used to pay off a company’s debts. Wouldn’t it be great if you could use your tax loss carryforwards to pay off a credit card bill? (see that Fannie post to understand what I mean)

A leverage ratio is basically assets/equity. If assets decline in value, and not because of a reduction in liabilities, then there has to be a one-to-one decrease in equity. This is so because for a balance sheet to “balance,” assets must equal liabilities + equity. In Fannie and Freddie’s case, you knew a long time ago that assets were going to fall at least 5% and that that would be enough to wipe out the company’s equity. At its most fundamental level, a company’s stock price is its equity divided by the number of shares outstanding. If equity = $0, then the stock price equals $0. Fannie’s and Freddie’s stocks both trade pretty close to $0.

Now consider Citigroup. It has $2.05 trillion of assets listed on its balance sheet. That includes $63 billion of “goodwill and intangibles,” worthless assets like Fannie’s DTAs. Contrast this with the company’s equity of $151 billion, which would include $25 billion from TARP. That implies a leverage ratio of 14x, not 10x as the bank would have you believe when it publishes its “Tier 1″ capital ratio. Remove goodwill and intangibles from assets and equity and you have a true leverage ratio of 23x. = ($2.05 trillion - $63 billion) / ($151 billion - $63 billion). That’s roughly the same calculation we did to get to Fannie’s true leverage ratio of 100x.

By the way, I’m giving Citi credit for the $164 billion of “other assets” on the balance sheet as well as $19 billion of assets of “discontinued operations” held for sale. These sound pretty squishy too…

And now for the scary part. Citi’s $2.05 trillion of assets are just “on-book” assets. They have $1.6 trillion of credit commitments and $1.3 trillion of “off-balance” sheet commitments to boot.

You only need a small paper loss on the company’s assets (on or off balance sheet) in order to wipe out the company’s equity.

Now what if I told you the same is true for all the major banks in the U.S. and Europe?

You might think it prudent to keep some money under your mattress.

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Op dinsdag 18 november 2008 08:45 schreef henkway het volgende:
dassallemaal wel heel erg dan

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Op dinsdag 18 november 2008 09:46 schreef Verbal het volgende:
Dat zei ik...

V.

quote:

Worst May Be Yet to Come for Citigroup - NY Times (13 nov)

After a year of red ink, a months-long plunge in its share price and a $25 billion government rescue, you might think the worst was over for Citigroup.

It is probably not.



Citigroup, which a decade ago set out to rewrite the rules of American finance, is bracing for still more pain now that a recession is at hand. Loans that the financial giant made to consumers in good times are going bad in growing numbers. For the moment, profits seem as elusive as ever, analysts say.

Once the most valuable financial company in America, Citigroup is withering along with its share price, which this week sank into single digits for the first time in a dozen years. The company is also shrinking in another painful way: by cutting, and cutting, and cutting jobs. Another round of pink slips is expected next week.

As Vikram S. Pandit completes his first year as chief executive, many analysts say Citigroup has lost its way. Insiders say the company is racked by office politics at a critical moment in its history.

Mr. Pandit is struggling to regain his grip on the company, which operates in scores of countries, after his attempt to buy Wachovia was upended by Wells Fargo. That misstep left Citigroup grasping for a new strategy to lure deposits and build up its branch network in the United States.

“Citi doesn’t have a credible management team, they don’t have a credible board,” said Christopher Whalen, managing partner at Institutional Risk Analytics. “If you look at their loss rate, it is almost inevitable that Citi is going to be asking the government for more money next year.”

Worries about Citigroup’s future were apparent in the stock market on Thursday. While the share prices of many of its rivals soared along with the broader market in a stunning afternoon rally, Citigroup’s stock fell nearly 2 percent by the end of regular trading. At its closing price of $9.45, the stock has lost almost 68 percent this year, making it the third-biggest loser in the Dow Jones industrial average, behind Alcoa and General Motors.

Many Citigroup employees know their jobs are on the line. Executives said that as of the third quarter, the bank had announced plans to eliminate 40,100 jobs. That includes reductions resulting from the divestitures of the company’s German retail banking operations and its Indian outsourcing franchise.

But Citigroup still needs to hand out pink slips to 9,100 workers to meet its goals, and bankers are bracing for much of the bad news to arrive early next week, according to executives briefed on the situation.

Investment bankers are expected to bear the brunt of the cuts because senior managers have been asked to reduce expenses significantly. But back-office functions, like the bank’s legal and human resources divisions, are also expected to be hard hit.

The ax could keep falling. While there are no formal plans for further job cuts, executives say it is possible that Citigroup could shed an additional 25 percent of its work force by the end of next year. Such a reduction would include layoffs, a hiring freeze and work force reductions related to businesses that the company is considering selling. Such a move would reduce the total number of employees to 264,000, from about 352,000 today.

Christina Pretto, a Citigroup spokeswoman, said that the bank was carefully managing its employee levels as it revamps the company to operate more efficiently in the current downturn. “Nothing has changed,” Ms. Pretto said.

Citigroup is also grappling with how to position its domestic consumer business, which faces rising loan losses and, analysts say, lacks the leadership and strategy it needs. Having lost Wachovia, Citigroup must now try to stitch together a group of small regional banks to catch up with Bank of America, JPMorgan Chase and Wells Fargo. Executives are looking at Chevy Chase Bank, a small lender in Maryland with $14 billion in assets, among several other institutions, according to people close to the situation.

But assembling a large franchise could take years, and digesting deals has never been one of Citigroup’s strengths.

Even with all these problems, Citigroup’s board has been bickering over seemingly small issues, including which white-shoe law firm will represent it, according to a person close to the situation. Wachtell, Lipton Rosen & Katz had been representing the board, but that firm is representing Well Fargo in litigation over the Wachovia deal. Cravath, Swain & Moore is now being considered to represent Citigroup’s directors, but no decision has been made, according to a person close to the situation.

Citigroup has tried to put on a united front amid the turmoil. Richard D. Parsons, one of the company’s most outspoken directors, said on Thursday that the board was fully behind Mr. Pandit and Winfried F. W. Bischoff, its executive chairman, as it braced for a difficult 2009.

Mr. Pandit, for his part, led a group of Citigroup executives in buying 1.3 million Citigroup shares as the stock tumbled on Thursday.

It was the first time that Mr. Pandit, who had collected $165.2 million from selling his hedge fund to Citigroup before becoming chief executive, publicly disclosed using his own money to buy Citigroup stock.

Ms. Pretto, the Citigroup spokeswoman, said the “purchases reflect their belief in the long-term strength and growth opportunities of the company.”

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Op dinsdag 18 november 2008 11:38 schreef Mendeljev het volgende:
Ik heb eigenlijk toch wel vertrouwen in die Arabieren. Ze kopen niet voor niets de financials op.

quote:

Op dinsdag 18 november 2008 11:38 schreef Mendeljev het volgende:
Ik heb eigenlijk toch wel vertrouwen in die Arabieren. Ze kopen niet voor niets de financials op.

quote:

Op dinsdag 18 november 2008 11:54 schreef rvlaak_werk het volgende:

[..]

Gisteren werd er in 1-vandaag gezegd dat het met de arabische banken helemaal niet slecht gaat.

quote:

Op dinsdag 18 november 2008 17:52 schreef TubewayDigital het volgende:
wat ik grappig vind is dat die banken elkaar analyseren. Bij JP morgan en ABN zitten analisten die van citigroup verstand hebben en vice versa (niet meer) etcetera

Hou je eigen soort aan het werk.

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Op dinsdag 18 november 2008 17:56 schreef HarryP het volgende:

[..]

Wel handig als je elkaar miljarden leent.

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Op dinsdag 18 november 2008 14:43 schreef MrFl0ppY het volgende:

[..]

Toch wel pijnlijk dat die Arabieren met Amerikaanse dollars (olie inkomsten) de grote jongens in de VS opkopen.

quote:

Op dinsdag 18 november 2008 17:44 schreef TubewayDigital het volgende:
Is citigroup niet het grootste financiele congromelaat ter wereld

En vallen? Obama springt toch wel bij met een zak geld

(bedankt voor die BNR link btw)

quote:

Op dinsdag 18 november 2008 18:02 schreef Mendeljev het volgende:

[..]

Dat is ook de hele strategie naast het kopen van 300 auto's. De Arabieren schijnen zelfs voor 7% aandeel te hebben in de Amerikaanse economie. Ik vraag me af hoeveel dat aandeel is na de kc.

quote:

Citigroup falls on concern job cuts won't fix bank
Tue Nov 18, 2008 11:01am EST

NEW YORK (Reuters) - Citigroup Inc (C.N: Quote, Profile, Research, Stock Buzz) shares fell as much as 6.4 percent to a nearly 13-year low on Tuesday amid concern that a plan to shed 52,000 jobs might not go far enough to restore the banking giant to health.

Chief Executive Vikram Pandit announced plans on Monday to eliminate the jobs by early next year in an effort to reduce operating costs at the second-largest U.S. bank by up to 20 percent in 2009.

About one-half of the jobs will be cut through asset sales, and one-half through layoffs and attrition. The reductions would reduce Citigroup's work force to 2005 levels.

Citigroup offered few specifics on where the cuts will be made, except to say that they will be global and affect a wide array of business lines. Some analysts believe the New York-based bank may be hard-pressed to turn a profit in 2009. Citigroup has lost $20.3 billion in the last four quarters.

"The earnings picture is likely to be tough until there are signs of a stabilization in consumer credit quality, which at this point appears unlikely until at least the back half of 2009," CreditSights Inc analyst David Hendler wrote.

Richard Bove, a Ladenburg Thalmann & Co analyst who rates Citigroup stock as "buy," said investors "still do not trust the company's balance sheet," and focused on the cuts as a sign of more troubles ahead, especially given the bank's exposure to many non-U.S. economies that are also under pressure.

He said investors should instead focus on the bank's diverse operations, which rivals cannot replicate.

"This leads to the conclusion that despite loan losses and writedowns, earnings will recover," he wrote. "If this is the case, this stock is cheap."

Citigroup shares were down 33 cents, or 3.7 percent, to $8.55, after falling as low as $8.32 earlier in the session on the New York Stock Exchange. They fell to a 13-year low of $8.28 on November 13.

Through Monday, the shares were down 70 percent this year. Citigroup is a component of the Dow Jones industrial average .DJI.

(Reporting by Jonathan Stempel; editing by Jeffrey Benkoe)

quote:

Op dinsdag 18 november 2008 20:38 schreef LXIV het volgende:
Ze kunnen beter voor een gecontroleerde crash gaan, dan blijft de rest van het systeem tenminste staan.

quote:

Op dinsdag 18 november 2008 20:38 schreef LXIV het volgende:
Ze kunnen beter voor een gecontroleerde crash gaan, dan blijft de rest van het systeem tenminste staan.

quote:

Op dinsdag 18 november 2008 19:01 schreef Emu het volgende:

[..]

WAS niet is... ondertussen voorbijgestreefd door zowel JPM als BAC (als je resp. WAMU en MER bij de balansen van deze rekend).

Ik den kdat Citigroup het wel zal halen, hun omzet blijft redelijk stabiel, en ze hebben in verhouding tot sectorgenoten al een pak meer reserves ivm loan losses. Voor volgend jaar verwacht ik de 3 eerste kwartalen nog een verlies (kleinder dan 1milj. per kwartaal). Het komt dus wel goed volgens mij. Maar C kopen doe ik toch nog wel even niet.

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Op donderdag 20 november 2008 01:35 schreef Llotyhy het volgende:

[..]

Optimist...

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Op donderdag 20 november 2008 17:46 schreef ItaloDancer het volgende:
-20% op 5 dollar.

R.I.P. Citi

quote:

Citigroup's Move Below $5 Could Trigger Major Selling

Citigroup's stock [C] is spiraling down towards $5—a 13-year low—but the banking giant's troubles may be just beginning.

Most institutional investors and pension funds are barred from owning stocks below $5. So if Citigroup's stock falls below that level, it could trigger a wave of selling that would send the share price even lower.

"That's the danger of crossing that $5 threshold," says Owen Malcolm, senior vice president of Sanders Financial Management in Atlanta. "They're (Citigroup) already in trouble. It could get worse."

Money managers wouldn't necessarily have to sell Citi immediately. But they would have to get out before the end of the quarter and may opt to do so now to mitigate potential losses.

"They've got five, six weeks to make decision on whether they're going to get out," Malcolm says. "There's still a lot of institutional ownership of Citigroup. That could change quickly if they have to be out at the end of the year."

Citi shares tumbled again Thursday despite news that Saudi Prince Alwaleed bin Talal plans to increase his stake in the company to 5 percent from less than 4 percent. The prince said the bank's shares were "dramatically undervalued" and voiced support for the current board and CEO Vikram Pandit.

But Alwaleed's investment position didn't change investors' view of the firm, which has been hammered by the credit crisis like the rest of Wall Street. Analysts were watching the stock price closely to see how it would affect pension funds that hold Citi shares.

"It's getting to the point where it's make-or-break time for Citigroup," says Ryan Detrick, an analyst at Schaeffer's Investment Research in Cincinnati. "It doesn't look promising."

For Citigroup, a Dow component and one of the world's biggest financial institutions, the reversal in its stock price is stunning. The stock was trading at over $20 a month ago and $31 a year ago. It has plunged nearly 90 percent in nearly two years.

Citigroup shares have lost one-third of their value in the first three days of this week as investors worried that Pandit's plan to cut expenses by 20 percent and eliminate 52,000 jobs won't restore the bank to health.

Citigroup has lost $20.3 billion in the last year and taken tens of billions of dollars of writedowns on mortgage and other toxic debt. Analysts expect it to lose money in the fourth quarter, and some don't expect it to be profitable in 2009.

quote:

Op dinsdag 18 november 2008 11:38 schreef Mendeljev het volgende:
Ik heb eigenlijk toch wel vertrouwen in die Arabieren. Ze kopen niet voor niets de financials op.

quote:

Saudi prince to boost stake in Citigroup

NEW YORK (CNNMoney.com) -- Citigroup's largest individual shareholder, Saudi Prince Alwaleed Bin Talal, said Thursday he planned to increase his stake in Citigroup back to 5%, even as shares of the firm have plummeted in recent weeks.

The move by Alwaleed, a long-time investor in the bank, follows the U.S. government's decision to inject some $25 billion into the New York City-based bank. That left Alwaleed with about a 4% stake in Citigroup.

The news did little to comfort fellow Citigroup (C, Fortune 500) investors, however. The stock tumbled 18% Thursday morning, extending the brutal losses from Wednesday, when the stock plunged 23%. Shares of the firm are down 78% so far this year.

In a press release from his holding company, Alwaleed expressed his faith in Citigroup management, including CEO Vikram Pandit, and added that he believed the company was doing what is necessary to weather the current economic crisis.

Alwaleed's firm did not provide terms of the purchase including how many shares he would purchase or at what price.

Based on the most recent securities filings, Alwaleed and his holding company owned more than 250 million shares of Citigroup.

Alwaleed, worth about $21 billion according to Forbes, is one of the world's richest people. The Saudi prince first acquired a stake in Citicorp, which later became Citigroup, in 1991. According to filings, Alwaleed also is a big investor in media company News Corp and online travel site Priceline.com.

Earlier this year, he was among a group of investors who invested $12.5 billion in Citigroup, as part of an effort by the bank to raise capital.

Citigroup, the nation's fourth-largest bank in terms of deposits, has been one of the hardest hit financial firms during the credit crisis.

Earlier this week, the New York City-based bank unveiled plans to cut its staff levels by more than 50,000 in an attempt to reduce expenses as it braces for what many are anticipating will be a difficult economic climate in 2009.

There has even been talk that changes could come at the top of the organization although the company has strenuously denied such speculation.

At the same time, analysts have warned that the company still faces a large exposure to problem assets, such as mortgages, credit cards and commercial real estate.

Fox-Pitt Kelton Cochran Caronia Waller analyst David Trone noted in a report earlier this week that the bank would likely be forced to take additional writedowns and report another loss in the fourth-quarter.

The bank has lost more than $20 billion in the past four quarters.

Citigroup is also bracing for a tough economic climate in 2009, which could translate to rising losses tied to consumer and business loans

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Op dinsdag 18 november 2008 08:07 schreef Drugshond het volgende:

[..]

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Op vrijdag 21 november 2008 08:18 schreef Dinosaur_Sr het volgende:

[..]

Citi een leverage van 14 of 23x?
en dat is een risico?

ING heeft een leverage van ongeveer 50x
wat is dat dan?

quote:

Citi “weighs options”
November 20, 2008 – 11:26 pm

by Rolfe Winkler, CFA

The Citigroup Death Watch continues, according to the Journal:

The sell-off in Citigroup shares has led executives to start laying out possible contingency plans. In addition to pondering a move to sell the entire company to another bank, executives have started exploring the possibility of selling off parts of the firm, including the Smith Barney retail brokerage, the global credit-card division and the transaction-services unit, which is one of Citigroup’s most lucrative and fast-growing businesses, the people said.

Mr. Pandit, an enthusiastic defender of Citigroup’s existing mix of businesses, is loath to pursue such an approach, the people said.

Bank executives argue the company is well-capitalized, but that’s simply false. And the market knows it. As I wrote a few days ago, Citi’s true leverage ratio (after backing out goodwill and intangibles from capital and adding back off-balance sheet liabilities and commitments) is somewhere between 35:1 and 70:1. Even at the lower end, that means Citi is terribly vulnerable to a decline in the value of the asset side of its balance sheet. PR efforts highlighting the bank’s “strengths” are kind of hilarious:

Executives in recent days have been telling traders, brokers and other employees to reach out to clients and tick off a list of factors that showcase Citigroup’s strength. On Thursday, for instance, executives in the wealth-management unit arranged a Friday-afternoon conference call for clients. A brochure that brokers were asked to share with clients promises that the call “will help you to better understand the current financial crisis.”

The government won’t let Citi collapse. They’ll force a sale to another bank, like Chase, B of A, Wells Fargo, or perhaps a stronger, foreign rival. But the problem is that we’re just building a bigger time bomb. All of the above banks have very high leverage ratios. Fundamentally, they’re not in a significantly better position to withstand the crisis than Citi. The government will, perhaps, try to roll up all private banking assets into one super bank, which will receive unconditional government support. And yet, the potential failure of the super bank could blow up even the government’s balance sheet.

Interesting times…

quote:

Within the bank’s Manhattan offices, television screens have stopped displaying the company’s stock price. Traders have begun making jokes comparing Citigroup to the Titanic.

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Op vrijdag 21 november 2008 13:32 schreef MrFl0ppY het volgende:
http://www.nytimes.com/2008/11/21/business/21finance.html?em
[..]

Snel jongens de TV's uitzetten. Dan valt het niet zo op

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Op vrijdag 21 november 2008 15:54 schreef henkway het volgende:

[..]

gouden kans voor Buffett om city over te nemen voor 10% van de waarde

quote:

Op vrijdag 21 november 2008 13:32 schreef MrFl0ppY het volgende:
http://www.nytimes.com/2008/11/21/business/21finance.html?em
[..]

Snel jongens de TV's uitzetten. Dan valt het niet zo op

quote:

Op vrijdag 21 november 2008 15:54 schreef henkway het volgende:

[..]

gouden kans voor Buffett om city over te nemen voor 10% van de waarde

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Op vrijdag 21 november 2008 16:39 schreef Dinosaur_Sr het volgende:

[..]

10% van welke waarde?

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Op vrijdag 21 november 2008 18:48 schreef henkway het volgende:

[..]

De beurswaarde van vier maanden terug, zeg maar in de ABN AMRO tijd.

quote:

Citi Rescue Talks Underway
The market shrugged off the prospect of a Citigroup meltdown and focused instead on the leak that Timothy Geithner was Obama's pick for Treasury Secretary. Citi fell another 20%, its shares dropping below $4. Have banking catastrophes become so routine that it is now assumed that the officialdom will clean up the broken china and put the bill in the post? I recall when Citi nearly failed in the early 1990s (the big culprit then was junior loans on a lot of commercial development in Texas that wound up being see-throughs) and it was white-knuckle time.

However, there is a big difference between this and other financial firm meltdown episodes. Despite the near vertical descent of the stock, there appears to be no run on the bank. And if there is no run on the bank, or flight of counterparties, there is no need for a rescue.

But as we have pointed out, the Fed is acutely sensitive to the needs of banks, so it would be highly unwise to bet against official intervention before the markets open on Sunday in Asia.

Forgive me for lifting a section from yesterday's post, but it is germane:

John Hempton has suggested that the reason Shiela Bair pushed the deal with Citi, despite it being worse for the taxpayer that the one offered by the successful bidder, Wells Fargo, was that it would have provided a route for a back-door bailout:

Sheila Bair – as readers will remember – forced Wachovia to sell itself in three days whilst other parties had not had anything like enough time to complete due diligence. She – unilaterally and incorrectly – told the world that this deal could not be done without government assistance. She unilaterally decided to issue a guarantee that on a pool of $312 billion of Wachovia assets Citigroup could not lose more than $42 billion. She made that decision even though Wells Fargo was telling her that all they required was more time to do due diligence.

Given that Wells Fargo was willing to acquire Wachovia at no-cost to taxpayers that looks like a very bad decision indeed. But this is the post assuming that Sheila Bair is smarter than all of us.

And so we need to understand the significance of that guarantee. The significance is as follows: Once Citi owns $312 billion in assets on which they can only lose $42 billion the remaining pool must be worth $270 billion. That $270 billion is guaranteed by the US Government – as the FDIC is a full faith and credit organisation. Citigroup can put that $270 billion (plus the $42 billion in non-guaranteed assets) in a pool and repo it – and as Treasuries yield very little they will wind up paying well under a percent of interest. The Sheila Bair decision was equivalent to a cash injection into Citigroup of 270 billion because the repo-market will turn government guaranteed loans into cash.

That cash injection is almost 40 percent of the size of the whole bailout package and it was given to Citigroup by Sheila Bair without congressional oversight. We got all stroppy at giving Paulson that sort of unilateral powers – but – hey – we are prepared to forget that Sheila Bair already has them.


The size and nature of a rescue operation could indirectly confirm or dispute Hempton's views. It suggests that Citi may never have gotten over the SIV mess of last year. Recall that Citi was far and away the biggest single exposed party and would clearly have been the biggest beneficiary had Paulson's TARP version 1.0 (known as the MLEC, or Master Liquidity Enhancement Conduit) ever seen the light of day.

We don't follow Citi systematically, but checking our posts, Citi as of end of second quarter 2008 had $1.1 trillion in off balance sheet assets, in addition to its $2.2 trillion of assets shown in its published financials. It was not clear at the time how Citi intended to deal with those exposures. Pandit had said then that he intended to reduce the balance sheet (as in the $2.2 trillion version) by $400 billion, which included $45 billion of former SIV assets.

From the New York Times;

With the sharp stock-market decline for Citigroup rapidly becoming a full-blown crisis of confidence, the company’s executives on Friday entered into talks with federal officials....the executives and officials weighed several options, including whether to replace Citigroup’s chief executive, Vikram S. Pandit, or sell all or part of the company.

Other options discussed included a public endorsement from the government or a new financial lifeline, people involved in the talks said....

As Citigroup’s stock sank during the day, falling 68 cents to close at $3.87, the Federal Reserve was carefully monitoring how much money corporations and other customers were withdrawing from the bank...

So far, these people said, most customers and clients remained committed to Citigroup....

But with Citigroup’s troubles opening a new chapter in the long-running financial crisis, government officials said that the Treasury Department was considering whether to ask for the second half of the $700 billion rescue fund approved by Congress in September.

It was unclear whether any of that money would be used to make a cash infusion into Citigroup, which received $25 billion from the government in October. A second financial rescue for banks might be difficult politically at a time that the struggling auto industry is being turned away in Washington...

“If there’s a flight from Citi’s stock, that’s unfortunate, but I don’t think that’s the government’s business,” said David M. Walker, the president of the Peter G. Peterson Foundation and a former United States comptroller general.

Mr. Walker said that the government should be concerned about Citigroup only if there were a run on the bank that threatened the financial system. The government should not, he said, be concerned about shareholders.

Some executives, however, argued that it was important to protect Citigroup’s shareholders because if they lose their investment, that will send other bank stocks diving.

Among the other ideas being bandied about Washington and the halls of Citigroup would be an assisted merger between Citigroup and another major bank. The merger might be structured with government assistance based on the blueprint that was developed for the Wachovia and Citigroup merger.

That deal ultimately did not go through because Wells Fargo stepped in with a higher offer, but it would have involved the Federal Deposit Insurance Corporation sharing the losses on $312 billion of Wachovia’s loans with Citigroup. Citigroup would have absorbed the first $42 billion in losses, and the government would have absorbed the rest. The F.D.I.C. would have been given $12 billion in warrants and preferred shares of Citigroup in exchange.

That structure could be used in a merger, but this time around, the government would be absorbing losses on Citigroup’s loans. But it remains unclear what other bank is in a strong enough position to merge with Citigroup.

Inside Citigroup on Friday, some angry senior executives said that the government had “allowed” Wells Fargo to take Wachovia from them, people at the firm said. They argued that had Citigroup and Wachovia been allowed to merge “we wouldn’t be in this position,” one executive said.


Yves here. This certainly seems to confirm Hempton's theory. Back to the article:

Another option might be for the government to purchase a large chunk of Citigroup’s assets in one swoop. Such an action could be structured similarly to the proposed deal in Switzerland for UBS. A spokesman for UBS, Mark Arena, said on Friday that the arrangement would allow UBS to have “one of the cleanest balance sheets of our peers.”

At the time of the deal’s announcement in October, Jean-Pierre Roth, president of the Swiss National Bank, said the government had the time to wait for the values of the assets to improve. “UBS does not have time,” Mr. Roth said.

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Citigroup May End Up With U.S. Government Rescue (Update1)

By Christine Harper and Bradley Keoun

Nov. 22 (Bloomberg) -- The U.S. government may step in to rescue Citigroup Inc. after a crisis in confidence erased half the bank’s stock-market value in three days, according to investors and analysts.

Citigroup’s $2 trillion of assets dwarfs companies such as American International Group Inc. that got support from the U.S. government this year. Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben S. Bernanke may favor a rescue to avoid the chaotic aftermath of Lehman Brothers Holdings Inc.’s bankruptcy in September.

“Citi is in the category of ‘too big to fail,’” said Michael Holland, chairman and founder of Holland & Co. in New York, which oversees $4 billion. “There is a commitment from this administration and the next to do what it takes to save Citi.”

One option is for the Federal Reserve and U.S. Treasury to create a special vehicle to purchase bad assets from Citi. The Fed has already erected several such funds, such as the Commercial Paper Funding Facility, to provide liquidity to the financial system. Typically, the Treasury would provide some first-loss equity or insurance fee, such as $50 billion provided to the CPFF, to protect the central bank and give the fiscal authority a stake.

The arrangement allows the Fed to leverage the money provided by the Treasury with loans, enabling the purchase of assets worth a multiple of the money. Funding the purchases with loans makes them less onerous to the U.S. budget.

Working Relationship

“That is the working relationship they have settled into with the Fed providing $1 trillion of the funding and the Treasury providing the equity tranche,” said Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey.

Citigroup management and some board members discussed “several options” for the company in a series of phone conversations with Paulson and New York Federal Reserve Bank President Timothy Geithner yesterday, the New York Times reported today, citing unidentified people involved in the talks.

Among those options were the possible replacement of Chief Executive Officer Vikram Pandit, a public endorsement of Citigroup by the government or a new financial lifeline, the Times said. No decisions had been taken as of late yesterday, it said.

‘Regulatory Intervention’

While Citigroup executives say the company has adequate capital and liquidity to ride out the crisis, its tumbling share price may shake the confidence of creditors, clients and rating companies. A similar scenario played out at Lehman, when Chief Executive Officer Richard Fuld declared the firm was “on the right track” five days before the firm went bankrupt.

“The market may be implying some sort of regulatory intervention,” Jason Goldberg, a former Lehman analyst who now works at Barclays Capital in New York, wrote in a note to clients yesterday. “In situations where the government has stepped in, the equity holders have not fared well.”

Pandit told employees yesterday that he doesn’t plan to break up the company, aiming to reassure workers as the stock resumed its skid. Citigroup shares dropped 94 cents, or 20 percent, to $3.77 in New York trading, giving the company a market value of about $21 billion. The stock pared its loss after the close of official trading, fetching $4.07 as of 4:35 p.m.

Pandit, Crittenden

Pandit and Chief Financial Officer Gary Crittenden, speaking on a worldwide conference call yesterday, also said they don’t expect to sell the Smith Barney brokerage unit, according to two people who listened to the call and declined to be identified because it wasn’t open to the public.

The call came as Citigroup’s board, led by Chairman Win Bischoff and independent director Richard Parsons, prepared to meet yesterday at the bank’s headquarters in New York, said a person familiar with the company’s plans who declined to be identified because the deliberations are private. Bischoff, interviewed at a conference in Portugal yesterday, declined to comment on any potential changes to the board.

“Providing stability” and “securing the future” are the themes of a new print advertisement that Citigroup plans to start running tomorrow in major markets in the U.S. and overseas. “Now, more than ever, you can feel confident that Citi never sleeps,” the ad reads.

No. 5 By Value

Once the biggest U.S. bank, with a market value of $274 billion at the end of 2006, Citigroup has now slipped to No. 5 behind Minneapolis-based U.S. Bancorp. A plan by 51-year-old Pandit this week to cut costs by shedding 52,000 jobs and an endorsement by billionaire Saudi investor Prince Alwaleed bin Talal didn’t assuage shareholders’ concern that bad loans and securities writedowns may extend a yearlong run of net losses totaling $20 billion.

“To be consistent with the last few government interventions, I don’t think Citigroup’s going to be allowed to fail,” said William Fitzpatrick, an analyst at Optique Capital Management Inc. in Milwaukee, which oversees about $1 billion and doesn’t own Citigroup shares. “This company’s too intertwined with the rest of the financial system to allow any further deterioration.”

Citigroup spokesman Michael Hanretta declined to comment. On the call yesterday with employees, Pandit said the company’s capital and liquidity are strong.

Including a $25 billion capital injection from the U.S. Treasury under the $700 billion Troubled Asset Relief Program, the company has at least $50 billion of capital above the amount required by regulators to qualify as “well capitalized.” Capital is the cushion banks must keep to absorb losses and protect depositors.

‘Special Case’

Deutsche Bank AG analyst Mike Mayo wrote in a report yesterday that the bank’s $25 billion of reserves, when combined with other resources, “should be enough to cover estimated cumulative losses of $50 billion on loans.’” Mayo rates the stock “hold” and has a $9 price target.

“With Citi being as big as they are, the government will make a special case and step in and find another reason to dispose of more TARP funds,” said Matt McCormick, a portfolio manager and banking analyst at Bahl & Gaynor Investment Counsel in Cincinnati, which manages about $2.9 billion and doesn’t own Citigroup stock or debt.

Pandit was appointed last December to succeed Charles O. “Chuck” Prince, who was ousted as mortgage-bond writedowns saddled the bank with a record fourth-quarter loss of almost $10 billion. Prince was the handpicked successor of former Chairman and CEO Sanford “Sandy” Weill, who built the company through a series of acquisitions over 17 years before stepping down in 2003.

Deposits Said Safe

Bischoff, 67, was Citigroup’s top executive in Europe until he was named chairman when Pandit became CEO.

Bank employees have been telling customers their deposits are safe, and so far corporate clients haven’t moved their money elsewhere, said three people familiar with the matter who declined to be identified because they weren’t authorized to speak publicly about the accounts.

Crittenden, 50, has told colleagues it would be unwise to make hasty decisions to dispose of good businesses to satisfy investor demands for a show of action, one person familiar with the matter said.

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Op vrijdag 21 november 2008 19:01 schreef Dinosaur_Sr het volgende:

[..]

ik heb ook nog aandelen UPC voor je voor 8 euro. Of KPN Quest voor 10% van de waarde. Interesse?

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Citigroup Under Siege Eyes Government Rescue

Shares of Citigroup fell another 20% today to $3.77 and touched a new low at $3.05. Billed as "too big to fail" Citigroup May Get Government Rescue.

Citigroup Inc. will probably get rescued by the U.S. government after a crisis in confidence erased half its stock-market value in three days, investors and analysts said.

Citigroup has more than $2 trillion of assets, dwarfing companies such as American International Group Inc. that got U.S. support this year. Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben S. Bernanke may favor a rescue to avoid the chaotic aftermath of Lehman Brothers Holdings Inc.’s bankruptcy in September.

“There is no question that Citi is in the category of ‘too big to fail,’” said Michael Holland, chairman and founder of Holland & Co. in New York, which oversees $4 billion. “There is a commitment from this administration and the next to do what it takes to save Citi.”

While Citigroup executives say the company has adequate capital and liquidity to ride out the crisis, its tumbling share price may shake the confidence of creditors, clients and rating agencies. A similar scenario played out at Lehman, when Chief Executive Officer Richard Fuld declared the firm was “on the right track” five days before the firm went bankrupt.

“The market may be implying some sort of regulatory intervention,” Jason Goldberg, a former Lehman analyst who now works at Barclays Capital in New York, wrote in a note to clients today. “In situations where the government has stepped in, the equity holders have not fared well.”

Citigroup CEO Vikram Pandit told employees today that he doesn’t plan to break up the company, aiming to reassure workers as the stock resumed its skid.

Citigroup Claims Adequate Capital

Assuming one believes Citigroup has adequate capital, exactly why should the Fed care what its share price is? No one seems to care that Fannie Mae is trading at 30 cents. So, if Citigroup is well capitalized why can't it just keep lending and otherwise go on its merry way? And if it really does have adequate capital, it would be a screaming buy. Finally, If share price is a concern simply announce a reverse 10-1 split and the stock will be trading at $40 in a jiffy.

So I do not buy this "well capitalized" story and with talks of a rescue it seems no one else does either. Earlier today the board had an unscheduled meeting to discuss the bank's options. The market was unimpressed as Credit Risk Rose on Citigroup Breakup Speculation.

Balance Sheet Blues

"Investors right now aren't convinced that we're done seeing dead bodies on the Citigroup balance sheet," said William Fitzpatrick, an equity analyst at Optique Capital Management Inc. in Milwaukee, which oversees about $1 billion and doesn't own Citigroup shares. "That's what the sell-off is, concern over more and more losses over the next couple of quarters."

Concern over its balance sheet is indeed one of the issues. Credibility of Citigroup management is another issue. I discussed both yesterday in Citigroup Blames Short Sellers For Collapse and previously in Citigroup's Town Hall Meeting.

Citigroup, Under Siege

The New York Times is reporting Citigroup, Under Siege, Holds Talks With U.S.

In a series of tense meetings and telephone calls, the executives and officials weighed several options, including whether to replace Citigroup’s chief executive, Vikram S. Pandit, or sell all or part of the company. Other options discussed included a public endorsement from the government or a new financial lifeline, people involved in the talks said.

My Comment: A public endorsement? If it comes from Paulson it just may panic everyone.

After a board meeting early Friday morning, Citigroup’s management and some board members held several calls with Henry M. Paulson Jr., the Treasury secretary, and with the president of the Federal Reserve Bank of New York, Timothy F. Geithner, who later emerged as President-elect Barack Obama’s choice to be Treasury secretary.

As Citigroup’s stock sank during the day, falling 68 cents to close at $3.87, the Federal Reserve was carefully monitoring how much money corporations and other customers were withdrawing from the bank, people involved in the discussions said.

As Citigroup’s fortunes diminished on Friday, Mr. Pandit, the company’s embattled chief executive, went on the offensive. He worked the phones and held a companywide call to shore up the confidence of anxious employees.
Later in the day, the company held a similar call with large corporate customers. On Sunday, Citigroup plans to run full-page advertisements in major newspapers that acknowledge “our financial markets have been tested in unprecedented ways,” but argue that the company has a broad range of businesses and enough management expertise to pull through. In a nod to the company’s slogan, the text concludes: “That’s why now, more than ever, you can feel confident that Citi never sleeps.”

My Comment: Now there's a waste of money. If you have to advertise you have no problems, the ad may as well say "We have serious problems" because that is what everyone who reads the ad will know.

One maneuver that Mr. Pandit has championed is for the Securities and Exchange Commission to reinstate the “uptick rule,” which prevents short-sellers from betting against companies whose stock price is falling. Mr. Pandit has been lobbying the S.E.C. for the past week, as have other Wall Street chiefs.

Mr. Pandit and others have suggested that Citigroup is a victim of short-sellers, which some have blamed for speeding the demise of other financial companies this year.

In September, Richard X. Bove, an analyst at Ladenburg Thalmann, predicted that short-sellers would turn their attention to larger and larger financial companies, including Citigroup, which he said at the time was strong enough to withstand the pressure. “They’re going to hit a company that is too well grounded, too well capitalized, and I think that will be Citigroup,” he said.

My Comment: Pandit and Bove are both fools if they think short selling has anything to do with Citigroup's woes. Short interest is a mere 2.7%.

“The reason you have to ‘save’ Citibank is you cannot allow this hysteria,” said Peter J. Solomon, chairman of the Peter J. Solomon Company, a small investment bank.

My Comment: Add Peter J. Solomon to the ever growing list of clowns who think that failing companies need to be bailed out.

“If there’s a flight from Citi’s stock, that’s unfortunate, but I don’t think that’s the government’s business,” said David M. Walker, the president of the Peter G. Peterson Foundation and a former United States comptroller general.

David Walker and Ron Paul are among the very few in government positions or recently out of government positions who have a clue as to the complete fiscal insanity that is wrecking our nation.

Timothy Geithner, president of the New York Federal Reserve and Obama's Choice For Treasury Secretary has been involved in the meetings with Citigroup. Unfortunately Geithner is just another Keynesian clown who thinks that problems can be solved by throwing money at them. I am very disappointed in Obama's choice.

With that in mind, let's see what the weekend brings in regards to Citigroup.

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Op zaterdag 22 november 2008 18:27 schreef Drugshond het volgende:
Komt imo erop neer dat er snel een besluit genomen zal worden...no time to waste... anders is er een kapitaalvlucht. Waartegen geen reddingsoperatie bestand is.

Eigenlijk verwacht ik vandaag (hey het is zondag)... nog meer nieuws.

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Op zaterdag 22 november 2008 18:20 schreef henkway het volgende:

[..]

O, zijn je Wordlonline aandelen op dan??

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'Crisisberaad over bailout Citigroup'
Zondag 23 November 2008 at 12:36 pm
Citigroup krijgt mogelijk financiële steun van de overheid. Volgens Amerikaanse media wordt er druk overlegt tussen CEO Vikram Pandit en minister Paulson. Een herhaling van het Lehman Brothers-debacle moet voorkomen worden.

quote:

Citigroup krijgt mogelijk financiële steun van de overheid. Volgens Amerikaanse media wordt er druk overlegt tussen CEO Vikram Pandit en minister Paulson. Een herhaling van het Lehman Brothers-debacle moet voorkomen worden.

quote:

Citi considers putting risky assets in "bad bank"-WSJ - reuters
Sun Nov 23, 2008 5:24pm EST

NEW YORK, Nov 23 (Reuters) - Citigroup Inc is looking at putting risky assets in a "bad bank" -- a step to reassure investors that the rest of its assets were safe, the Wall Street Journal reported on Sunday.

The "bad bank" might take on some of Citigroup's more than $1.23 trillion of off-balance sheet assets. Citigroup might bear the initial losses on the assets, and the government might cover losses beyond a particular threshold, the newspaper reported, citing people familiar with the matter.

U.S. financial markets are waiting for some sort of Citigroup announcement this weekend, and if nothing happens, the bank's stock is likely to plunge further on Monday, analysts said.

Citigroup's shares fell 60 percent last week to $3.77, spurring the bank's management to talk to the U.S. Treasury and the Federal Reserve about its options.

The bank is not in danger of near-term collapse, people close to Citigroup said on Friday. Depositors are sticking with the bank, as are trading counterparties. The capital ratio that regulators look at most carefully, namely the tier-one capital ratio, is well above minimum required levels.

But a rapid decline in share price can make customers skittish and cut into a bank's business, wrote analysts at independent research boutique CreditSights on Saturday.

"Unfortunately, we feel like we have seen this movie before," they added. Lehman Brothers Holdings Inc and Washington Mutual Inc both experienced major declines in their shares, followed by an exodus of customers. Lehman filed for bankruptcy, while regulators took over Washington Mutual and sold its assets to JPMorgan Chase & Co.

Citigroup's executives last week debated options as the company's share price sank, including merging with another bank or selling off businesses. Citigroup also spoke to the Federal Reserve and the U.S. Treasury last week about the government making a public statement of support and perhaps even putting additional funds into the bank.

"Shareholders are saying, 'do something now,'" said William Smith, chief executive of Smith Asset Management, which owns Citigroup shares.

The Financial Times reported on Sunday that the board was meeting to discuss the bank's future.

quote:

WRAPUP 1-Citigroup gets $306 bln rescue from US government

NEW YORK, Nov 24 (Reuters) - The U.S. government agreed to a $306 billion rescue plan for Citigroup Inc (C.N: Quote, Profile, Research, Stock Buzz), agreeing to shoulder some losses from toxic debt in the latest attempt to bolster a financial services industry in turmoil.

Citigroup's package may also prove a template for other banks that are expected to face growing losses as economies worldwide sink into recession.

Credit losses once concentrated in mortgages are already bleeding into new, large areas such as credit cards and commercial real estate.

The nation's second-largest bank by assets has the farthest international reach of any U.S. bank, with operations in more than 100 countries. Many analysts have said Citigroup might be too big to be allowed to fail, and that any collapse could cause financial havoc around the globe.

"The market wants some kind of certainty about their losses," said Blake Howells, director of equity research at Becker Capital Management in Portland, Oregon.

The plan announced late Sunday calls for Citigroup to obtain $27 billion of capital by issuing preferred shares. The shares carry an initial 8 percent dividend, higher than the 5 percent it charges dozens of other lenders under its $700 billion financial industry rescue package. Citigroup itself got $25 billion in the earlier package.

Citigroup agreed to absorb the first $29 billion of losses on the $306 billion portfolio, plus 10 percent of additional losses, for a maximum total exposure of $56.7 billion. The Treasury Department could end up absorbing $5 billion, the Federal Deposit Insurance Corp $10 billion, and the Federal Reserve the rest.

The bank will not have to make management changes, but agreed to tighter restrictions on executive pay, and to try to modify troubled mortgages in the $306 billion portfolio. It also cannot pay more than 1 cent per share in common stock dividends per quarter for three years without the Treasury Department's consent. The quarterly dividend is now 16 cents.

"The U.S. government is taking the actions necessary to strengthen the financial system and protect U.S. taxpayers and the U.S. economy," the Fed, the Treasury Department and the FDIC said in a joint statement.

Asian stock markets trimmed earlier losses in Monday trading following the announcement. Dow Jones Industrial Average futures DJc1 were up 72 points at 8,089, while Standard & Poor's 500 futures SPc1 were up 11.20 points at 802.90.

The plan was announced less than a week after Pandit announced plans to reduce Citigroup's workforce to 300,000 by early next year from 375,000 at the end of 2007. (Reporting by Dan Wilchins and Jonathan Stempel; Editing by Jean Yoon)

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Op zondag 23 november 2008 15:23 schreef TubewayDigital het volgende:

[..]

waarom? Debacles gebeuren nou eenmaal en filteren de partijen die de verkeerde beslissingen nemen er uit.

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Op maandag 24 november 2008 09:40 schreef LXIV het volgende:

[..]

In principe klopt dat wel, maar met banken is het toch een ander verhaal. Wanneer één bank valt dan kan die, omdat andere banken daar geld hebben uitstaan, deze banken in zijn val meenemen. Dan klappen er dus ook gezonde banken om! En stort mogelijk het gehele systeem in elkaar. Daar is niemand mee gebaat.

Dat is toch anders als een worstfabriek failliet laten gaan, dat wordt wel overgenomen door de concurrentie, is zelfs goed voor de concurrentie. Hier is dat anders.

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Op maandag 24 november 2008 09:59 schreef Basp1 het volgende:
En al de worstfabrieken die overgenomen worden door steeds minder concurrenten is leuk maar op den duur hebben we dan wel een worstenmonopoly.

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Op maandag 24 november 2008 12:02 schreef SjonLok het volgende:

[..]

En dan komt mevrouw Kroes op een gegeven moment om de hoek, om een overname in de worstensector tegen te houden, zodat er geen monopolie ontstaat.

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Op maandag 24 november 2008 09:40 schreef LXIV het volgende:
Wanneer één bank valt dan kan die, omdat andere banken daar geld hebben uitstaan, deze banken in zijn val meenemen. Dan klappen er dus ook gezonde banken om! En stort mogelijk het gehele systeem in elkaar.

quote:

Op maandag 24 november 2008 09:40 schreef LXIV het volgende:

[..]

In principe klopt dat wel, maar met banken is het toch een ander verhaal. Wanneer één bank valt dan kan die, omdat andere banken daar geld hebben uitstaan, deze banken in zijn val meenemen. Dan klappen er dus ook gezonde banken om! En stort mogelijk het gehele systeem in elkaar. Daar is niemand mee gebaat.

Dat is toch anders als een worstfabriek failliet laten gaan, dat wordt wel overgenomen door de concurrentie, is zelfs goed voor de concurrentie. Hier is dat anders.

quote:

Op maandag 24 november 2008 12:13 schreef Bolkesteijn het volgende:

[..]

Je doet alsof banken en overheid er niks aan kunnen doen dat de banken gered moeten worden, maar niks is minder waar. Banken kiezen er zelf voor om maar een kleine voorziening aan te houden met betrekking tot de spaartegoeden die zij hanteren, faillissement is dus weldegelijk terug te voeren op de keus voor een bepaalde bedrijfsvoering. Verder zorgt de subisidie op lenen bij de centrale bank er voor dat commerciële een ongewenste omvang kunnen bereiken, namelijk die van 'te groot om failliet' te gaan. De kredietcrisis bood een uitgelezen kans om roekeloze cowboy-banken zoals Lehman Brothers, zoals Fortis, zoals FM en FM, zoals ING failliet te laten gaan en daarmee banken met de neus op de feiten te drukken dat het van groot belang is je voorzieningen op peil (en een veel hoger peil dan nu het geval is) te houden met betrekking tot spaartegoeden die beheert worden.

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Op maandag 24 november 2008 20:51 schreef LXIV het volgende:
ING is geen roekeloze cowboybank. Door alleen al zoiets te roepen laat je zien dat je er maar weinig verstand van hebt. Als het systeem zich altijd binnen een bandbreedte van -80 tot +80 heeft begeven, en jij gaat daarop handelen binnen een bandbreedte van -140 tot + 140, en er komt een systeemstoring die -220 bedraagt, ja dan heb je hulp nodig!!

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Vergeet niet dat het systeem, involmaakt als het is, ons wel van de grootste onafgebroken periode van welvaart voor iedereen ooit heeft voorzien. Alleen daarom al verdient het steun.

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En wat is jouw alternatief? Niet steunen en over anderhalf jaar overgaan tot ruilhandel? Wie is daar dan goed mee af?

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Update: Paul Krugman:

A bailout was necessary — but this bailout is an outrage: a lousy deal for the taxpayers, no accountability for management, and just to make things perfect, quite possibly inadequate, so that Citi will be back for more.

Amazing how much damage the lame ducks can do in the time remaining.

quote:

'PONZI SCHEME' AT CITI

By PAUL THARP

ROBERT RUBIN
Citigroup director.

A new Citigroup scandal is engulfing Robert Rubin and his former disciple Chuck Prince for their roles in an alleged Ponzi-style scheme that's now choking world banking.

Director Rubin and ousted CEO Prince - and their lieutenants over the past five years - are named in a federal lawsuit for an alleged complex cover-up of toxic securities that spread across the globe, wiping out trillions of dollars in their destructive paths.

Investor-plaintiffs in the suit accuse Citi management of overseeing the repackaging of unmarketable collateralized debt obligations (CDOs) that no one wanted - and then reselling them to Citi and hiding the poisonous exposure off the books in shell entities.

The lawsuit said that when the bottom fell out of the shaky assets in the past year, Citi's stock collapsed, wiping out more than $122 billion of shareholder value.

However, Rubin and other top insiders were able to keep Citi shares afloat until they could cash out more than $150 million for themselves in "suspicious" stock sales "calculated to maximize the personal benefits from undisclosed inside information," the lawsuit said.

The latest troubles for Rubin, Prince and others emerged in a 500-page investigation by Citigroup investors represented by law firm Kirby McInerney.

The probe was used to amend and add new details to a blanket investor lawsuit filed against Citigroup a year ago. The amended suit called the actions of Citi leaders "a quasi-Ponzi scheme" to hide troubles - and keep Citi stock afloat while insiders unloaded about 3 million shares between Jan. 1, 2004 and Feb. 22, 2008 for huge profits.

In addition to Citigroup, Rubin and Prince, the complaint names Vice Chairman Lewis Kaden, ex-CFO Sallie Krawcheck and her successor CFO Gary Crittenden.

Rubin cleared $30.6 million on his stock sales, while Prince got $26.5 million, former COO Robert Druskin got nearly $32 million and former Global Wealth Management unit chief Todd Thomson got $25.7 million, the suit said.

Citi denied the allegations and said it "will defend against it vigorously."

quote:

Citigroup Needs to Confess Its Writedowns Now

Dec. 4 (Bloomberg) -- Now that Citigroup Inc. has secured yet another taxpayer bailout, where are the writedowns?

You don't have to be that smart to figure out there's still a lot of rot on Citigroup's $2.1 trillion balance sheet. If there wasn't, the New York-based lender wouldn't have needed last week's government rescue, which included a new $20 billion investment by the Treasury Department, plus a guarantee covering about $306 billion of the bank's assets against most losses.

And yet, something's missing: a proper confession.

Let's say a company's board or management concludes mid- quarter that big charges to earnings are needed to write down impaired assets. Under the Securities and Exchange Commission's rules, that must be disclosed within four business days in an SEC filing. If the size can't be determined, disclosure is still required; the company just has to say it's unable to make a good-faith estimate of the amount.

It's been more than a week since Citigroup reached its Nov. 23 welfare deal with the government. Since then, it has made no such disclosure filing, though it did issue a press release on Nov. 19 divulging $1.1 billion of new investment losses.

That leaves a couple of possible explanations. Somehow, the people running Citigroup have imagined a way to avoid concluding that massive writedowns are needed, even after determining the bank might not survive without another bailout. Or -- and here's the odds-on favorite -- Citigroup's bosses operate as if the rules don't apply to them.

Losses in Sight

One reason we know Citigroup is anticipating huge losses is that the terms of its latest bailout agreement envision them. Citigroup is responsible for the first $29 billion of losses in the government-guaranteed portfolio, which includes loans and securities backed by residential and commercial real estate. The government will assume 90 percent of any other losses, with Citigroup taking the rest.

In return, Citigroup is handing the feds $7 billion of preferred stock. How sweet is that? Imagine an insurance company offering to charge you a $7,000 premium with a $29,000 deductible to insure your $306,000 house, knowing full well that the master bedroom is on fire.

That's more than a helping hand. It's a gift. The spillover benefit for the world at large is that a global financial meltdown is averted again, for now, and Saudi billionaire Prince Alwaleed bin Talal's 4 percent stake in Citigroup is saved.

Citigroup's deal might be less offensive if the bank and its protectors were being transparent about what they're up to.

Mystery Number

Start with the basics. The Nov. 23 term sheet released by Treasury said as much as $306 billion in assets will be guaranteed. What did that dollar figure mean? There's no way to tell. The term sheet, which also was approved by the Federal Reserve and the Federal Deposit Insurance Corp., said it will be based on a valuation agreed upon by the parties later.

We don't know if that valuation will be what the holdings were worth last week, at the end of last quarter, or on some other date. We also know little about what the assets are. In addition to the stuff backed by real estate, the term sheet said they include ``other such assets as the U.S. government has agreed to guarantee.'' That could be anything.

Whatever Citigroup's writedowns will be this quarter, there are many obvious candidates. For instance, as of Sept. 30, Citigroup had $63.1 billion of intangible assets, including $39.7 billion of so-called goodwill, which is worth nothing to a company on the verge of collapse. By comparison, Citigroup's stock-market value yesterday was $42.6 billion.

Citigroup also had deemed $7.9 billion of paper losses on mortgage-backed securities as ``temporary,'' as if the housing bubble is coming back soon. The designation, which is an old Freddie Mac and Fannie Mae trick, meant Citigroup didn't have to include the losses on its income statement or in its regulatory capital.

Damaged Goods

Under the SEC's rules, if a company ``concludes that a material charge for impairment to one or more of its assets'' is required by generally accepted accounting principles, then it must make the necessary disclosure, using a filing known as a Form 8-K.

The exception is if ``the conclusion is made in connection with the preparation, review or audit'' of the company's periodic financial statements. In that case, the company can wait until its next quarterly report to disclose the information.

Citigroup's fourth quarter doesn't end until Dec. 31. The company's finance whizzes don't need to start drafting their year-end balance sheet to know Citigroup has lots of damaged goods. If Citigroup Chief Executive Officer Vikram Pandit hasn't concluded this already, it's because he prefers not to. Same goes for director and senior counselor Robert Rubin, the former Treasury secretary.

When I asked a Citigroup spokeswoman, Shannon Bell, last week why the bank hadn't disclosed any significant impairment charges for this quarter, she replied: ``Citi follows all reporting requirements.'' When I asked again this week, she declined to elaborate. Her statement speaks volumes, nonetheless.

At the Bailoutpalooza, everybody knows the rules: There are no rules. This has to stop somewhere.

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Citigroup Goes To Sleep

It's the end of the line for Citigroup. The "group" will soon be gone as Pandit Dismantles Weill Empire to Salvage the Bank Within Citi.

Vikram Pandit is unraveling his empire to save his bank. Citigroup Inc.’s chief executive officer said yesterday he would cede control of the Smith Barney brokerage to Morgan Stanley. Pandit may also dump the CitiFinancial consumer-lending unit, tag Tokyo-based Nikko Asset Management Co. for eventual sale and rein in trading with the bank’s own capital, people familiar with the matter said.

Some current and former Citigroup executives place the blame for the firm’s troubles on Weill. He refused to spend enough on technology and failed to integrate the new companies he acquired, say people familiar with the matter.

“Each business has been operating with its own back office,” Pandit told investors and analysts gathered in New York on May 9. “We have 140,000 people in IT and operations. We have 16 database standards. We have 25,000 developers. This results not only in waste but doesn’t give us any opportunity to leverage our organization. That’s massively inefficient. We’re finally going to merge it all.”

What Pandit meant to say was "We’re finally going to dump it all. The Fed has forced my hand. The Citi that never sleeps, is about to."

Goodbye Citigroup, Hello Citibank.

On January 10 in Citigroup Pieces For Sale, Starting With Smith Barney I wrote

Kiss Citigroup goodbye, at least as you now know it.
Let's see if Citigroup's card unit is next on the block.
Let's also watch how many heads roll in a sale of Smith Barney to Morgan Stanley.

Citigroup IT jobs At Risk

It's safe to say that a substantial number of the 140,000 people in IT including 25,000 developers are about to do their final conversion. IT jobs are not easy to get, especially large mainframe banks jobs. I have some friends there, and I wish them well.

Capital Drought

The breakup of Citigroup shines a glaring spotlight on Bernanke's pretending this is all some sort of liquidity crisis. The reality is Citigroup Crisis Is Emblem of Capital Drought.

Time and again, big banks such as Citigroup Inc. argued that irrational and seized-up markets, not the woeful state of their balance sheets, were to blame for convulsing share prices.

For more than 18 months, the government went along with that thinking. Instead of demanding that banks recognize their losses, overhaul operations and quickly raise equity from private sources, regulators bet a flood of money would unclog credit markets.

When that didn’t work, the government doled out billions of dollars to more than 100 banks through the Troubled Assets Relief Program, or TARP, again with few demands that banks take harsh medicine. That hasn’t done the trick either.

The reason is pretty simple. This has never been a liquidity crisis. It’s a capital crisis. Namely, investors don’t think banks have enough of it, especially when it comes to tangible common equity.

Citigroup is a dramatic example. Its tangible common equity was 2.41 percent of tangible assets at the end of the third quarter. That was too low for investors’ liking and below peers such as JPMorgan Chase & Co. and Wells Fargo & Co.

Citigroup's Equity Is A Mirage

Yesterday in Bernanke Hints Banks, Economy In Much Worse Shape Than Previously Admitted I translated a statement made by Bernanke to "Banks are in much worse shape than we have admitted previously. More taxpayer money is needed to prop up these failing banks."

A sharp reader corrected me as follows "Banks like Citigroup are not failing banks, they are failed banks. If your only source of funds are the politicians handing out taxpayer money, you've already failed, you're bankrupt."

Indeed, Citigroup would easily be seen as bankrupt if its SIVs were brought back on the balance sheet and all of its assets marked to market. The same applies to dozens of other banks as well. The entire US banking system is insolvent. And if you read between the lines, that is exactly what Bernanke said yesterday.

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Op donderdag 15 januari 2009 13:31 schreef simmu het volgende:
beursbaby voorspelt het ook. als je der een plaatje van de aex laat zien gaat ze huilen

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Op donderdag 15 januari 2009 17:04 schreef Drugshond het volgende:
Waarom poker vraag ik mezelf af.
qua topic kicks kan ik beter gaan gokken op de beursvloer.

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In 2008 he joined the Obama transition team's Economic Advisory Board before being named Citigroup chairman.

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Op donderdag 22 januari 2009 11:48 schreef PietjePuk007 het volgende:
De nieuwe topman komt uit 't Obamateam.
[..]

Bron

Zo worden de lijntjes wel heel kort .

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Met his future wife, Laura Ann Bush

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Op donderdag 22 januari 2009 11:48 schreef PietjePuk007 het volgende:
De nieuwe topman komt uit 't Obamateam.
[..]

Bron

Zo worden de lijntjes wel heel kort .

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Op donderdag 22 januari 2009 16:56 schreef arjan1212 het volgende:
speculaties over de nationalisatie van citigroupbank en bank of america , pas op

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Citi in talks over bigger U.S. stake
Bank and regulators discuss plan for government to convert preferred shares, according to Wall Street Journal.
NEW YORK (CNNMoney.com) -- Citigroup Inc. is in discussions with regulators about a plan for the federal government to take a larger ownership stake in the bank, according to a report Sunday.

The Wall Street Journal, citing sources familiar with the matter, reported that the government would convert a large portion of its preferred Citigroup shares to common shares.

The government received the preferred shares in return for investing $45 billion in Citi as part of the $700 billion bailout of the financial system.

According to the Journal, the talks involve Citi executives and regulators at the Federal Reserve and Office of the Comptroller of the Currency. Officials in the Obama administration have not said whether they support the plan, the Journal reported.

Citigroup spokesman Michael Hanretta declined to comment on the Journal report. On Friday, the bank issued a statement saying that its capital base is "very strong" and capital reserves were among the highest in the industry at the end of the fourth quarter.

"We continue to focus and make progress on reducing the assets on our balance sheet, reducing expenses and streamlining our business for future profitable growth," Hanretta said.

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Op maandag 23 februari 2009 20:43 schreef Emu het volgende:
Toch mag ik dit bedrijf wel, dit is dus zo 1 van de bedrijven waardoor ik het verlies bij mij sterk heb kunnen beperken. Ik heb aandelen van dit gedrocht gekocht 2 keer in praktisch het putje, en dan verkocht met een dikke 30-40% een paar dagen later. I love Citi ! We zullen je missen schat

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Citi lijdt groter verlies door extra last; schrapt dividend
Vrijdag 27 Februari 2009 14:02
AMSTERDAM (Dow Jones)--De Amerikaanse bank Citigroup inc heeft vrijdag een groter verlies over 2008 bekendgemaakt als gevolg van een extra impairment-last van $9,6 miljard voor belasting in het vierde kwartaal van 2008 vanwege van de verslechterde financiele markten.

Ook boekte de New Yorkse bank een extra impairment-last van $374 miljoen voor belastingen op Nikko Asset Management. Als gevolg van de extra lasten is het verlies uit voortgezette activiteiten in 2008 uitgekomen op $32,1 miljard. De bank had eerder een jaarverlies uit voortgezette activiteiten gerapporteerd van $12,14 miljard.

De extra lasten hebben volgens Citigroup geen inlvoed op de kapitaalratio's en de liquiditeitspositie.

Ook wil Citigroup zo snel mogelijk de samenstelling van de Board of Directors wijzigen zodat deze voor de meerheid uit nieuwe onafhankelijke leden zal bestaan.

Daarnaast zal het dividend op de gewone aandelen en de preferente aandelen worden gestaakt. Ook zal de Amerikaanse overheid voor meer dan $25 miljard in preferente aandelen in Citigroup converteren in gewone aandelen. Het belang van de overheid zou daardoor kunnen worden uitgebreid tot 36%.

Beleggers reageren teleurgesteld op de aankondiging van Citigroup en sturen het aandeel vrijdag in de voorbeurshandel 30% lager tot $1,71.

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MARKET COMMENT: AEX zakt onder niveau maart 2003
Vrijdag 27 Februari 2009 14:11
AMSTERDAM (Dow Jones)--De AEX zakte vrijdag rond 13.30 uur door de 217,80 punten, het laagste niveau van maart 2003. De Amerikaanse futures staan vrijdag in de loop van de middag verder onder druk, 'nu de Amerikaanse overheid een belang neemt van 36% in Citigroup dat voorbeurs 50% zakt', aldus handelaar Rob Koenders van Harmony Vermogens beheer. Bovendien heeft de index al verscheidene malen de steun getest', aldus handelaar Peter Jurgens van Keijser Capital. Hij geeft aan dat een slot onder de 217,80 impliceert dat het beeld verder verslechtert, 'maar veel zal afhangen van hoe de toonaaangevende S&P 500-index zich houdt. Die moet boven zijn steun van 750 punten houden, zoniet, is de kans zeer groot dat de AEX verder onder druk komen te staan', aldus Jurgens. Van alle AEX-fondsen staan vooral de financials en zwaargewicht Shell met een verlies van 3,2%. De AEX noteert vrijdag rond 13.55 uur 3,1% lager op 216,77 punten. (ANS)

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Op vrijdag 27 februari 2009 14:22 schreef simmu het volgende:
van beurs.nl:
[..]

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Op zaterdag 21 maart 2009 19:24 schreef PietjePuk007 het volgende:
Citigroup Plans Big Bonuses Despite Rules Against Them

Het uitsmeren van de bonussen is wel een heel makkelijk om (deels) onder de nieuwe belastingregels te ontduiken .

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za 21 mrt 2009, 12:29
Zoellick: 2009 wordt een gevaarlijk jaar
BRUSSEL (AFN) - Wereldbankpresident Robert Zoellick waarschuwt voor de consequenties van de verwachte verslechtering van de wereldeconomie. Hij denkt dat 2009 een “erg gevaarlijk jaar” wordt.
Zoellick deed zijn uitspraken zaterdag in Brussel. De benarde situatie waarin banken verkeren en de afnemende wereldhandel baren hem zorgen. Zoellick vindt dat de G20, de zeven belangrijkste industrielanden en opkomende economieën, met een oplossing moet komen om de economie vlot te trekken. Begin april komt de G20 bijeen in Londen om de economische crisis te bespreken.

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Die wil echter op 31 oktober met dat steunprogramma stoppen.

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Op maandag 26 oktober 2009 08:26 schreef Rbhp het volgende:
Heeft dat verlies niet te maken met de 2 verschillende accounting methodes? Fair value en hold to maturity? Deze hebben 2 verschillende crisissen veroorzaakt, waarvan de 1e over is, maar de 2e moet nog komen.

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Op maandag 26 oktober 2009 08:27 schreef Dinosaur_Sr het volgende:

[..]

hoe kan een accounting method een crisis veroorzaken?

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Op maandag 26 oktober 2009 08:27 schreef Dinosaur_Sr het volgende:

[..]

hoe kan een accounting method een crisis veroorzaken?

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Consider the case of Citigroup, which last year was bailed out by the Treasury to the tune of $45 billion. For all its problems, the one bright spot at Citi has been its energy unit, Philbro, which over the past five years has earned roughly $500 million a year in pretax, pre-bonus trading profits. Under his contract, Andrew Hall, Philbro's head trader, is reportedly entitled to a bonus of roughly $100 million this year, but with taxpayers now owning roughly 40 percent of the bank, such a payout is politically unacceptable. When Feinberg indicated he would not approve the bonus and Hall threatened to walk, Citi reluctantly concluded its best option was to sell Philbro to Occidental Petroleum for the bargain price of $250 million.

To many on Wall Street, this seemed like a ridiculous outcome: Hall will still get his $100 million bonus, while self- righteous taxpayers are left with 40 percent stake in a less profitable Citigroup.

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Op dinsdag 27 oktober 2009 16:44 schreef Apache4U het volgende:
Ik dacht toch dat ik altijd vrij liberaal en rechts was, maar een bonus van 100 miljoen op een winst van 500 miljoen.. hoe kan dat gerechtvaardigd worden? Was die winst zonder hem niet behaald?
Sowieso, zo'n bonus... een jaartje werken en dan ben je klaar..

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Op dinsdag 27 oktober 2009 17:12 schreef Grrrrrrrr het volgende:

[..]

[standaardantwoord]Ja, dat is marktconform belonen he, anders gaan ze naar een bedrijf wat 200 miljoen uitkeert op 500 miljoen winst!!1!!![/standaardantwoord]

Je bent gewoon naïef als je dat soort bullshit gelooft, het is graaien, graaien en nog eens graaien, alleen heet dat 'marktconform' belonen.

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Op dinsdag 27 oktober 2009 16:44 schreef Apache4U het volgende:
Ik dacht toch dat ik altijd vrij liberaal en rechts was, maar een bonus van 100 miljoen op een winst van 500 miljoen.. hoe kan dat gerechtvaardigd worden? Was die winst zonder hem niet behaald?
Sowieso, zo'n bonus... een jaartje werken en dan ben je klaar..

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Op woensdag 5 januari 2011 23:35 schreef Cracka-ass het volgende:
Mooi om dit terug te lezen!

Hoe staat Citi er inmiddels voor?