Citigroup (C) 01 (May 08 - Nov 08)

[LenaHuat]

Hi K and iam802

K - Your guess is better than mine lah , all supported by charts and technicals
The Saudis must park their $$ somewhere. They must have bankers to deal with their cash reserves. They can't park the cash under the sand.

iam802- Yes, C can't possibly fold up. Long C now

[kennynah]

close both eyes, without any FA...i would choose C over UOB or DBS...reasons :

a) C is internationally exposed as compared
b) C has businesses beyond credit cards and mortgage loans, which prompts me to think C has other BUs to generate revenue; such as corporate financing, investment dealings (maybe not so hot now), securitization of good assets, loan syndications, etc
c) it now has a downside risks of US$5 maximum....with conceivable 2 -4 folds upside in future...

i like such risk/reward options...but that's just me...

[blid2def]

Didn't get at US$4 this morning. Haha... tonight try US$3 and see.

Anyway, for your info:
http://globaleconomicanalysis.blogspot. ... s-for.html

And another one:

Citigroup's Worries Mount
http://www.businessweek.com/bwdaily/dnf ... topStories

"On the Razor's Edge"

Citi is lobbying lawmakers and the Securities & Exchange Commission to reinstate a ban on the short-selling of financial stocks, The Wall Street Journal reported Nov. 20 on its Web site, citing sources familiar with the matter. The company is also seeking a reinstatement of the "uptick rule," which requires investors to wait until a company's stock goes up before short-selling it, according to the Journal.

"We're getting to the critical doomsday question: What happens when a megabank like Citi fails," says Weiss. He says the bank is "on the razor's edge. The biggest banks are not just important to the banking system, they are the banking system. All this starts to get into the neverland of uncertainty. No one really knows what happens next."

[kennynah]

in hokkien, we say "dua ho, dua pai"...so....caveat emptor...

[blid2def]

Hot stock for the day, so here's more articles:

Alwaleed Buys Citigroup Stock as Loss Exceeds Buffett (Update2):

Full Story - http://www.bloomberg.com/apps/news?pid= ... refer=home

Alwaleed Buys Citigroup Stock as Loss Exceeds Buffett (Update2)

By Ben Holland

Nov. 20 (Bloomberg) -- The Warren Buffett of the Gulf is taking a bigger hit from the credit crunch than the original.

Prince Alwaleed bin Talal was lauded by Time magazine as the Middle East’s answer to the Sage of Omaha after a 1991 investment in Citigroup Inc.’s predecessor helped make the Saudi billionaire one of the world’s five richest people.

This year, Alwaleed’s investments aren’t keeping pace with regional benchmarks, let alone Buffett. His Riyadh-based Kingdom Holding Co. has slumped 63 percent -- more than Saudi Arabia’s Tadawul All-Share Index or Buffett’s Berkshire Hathaway Inc. -- wiping out $13 billion in value. Kingdom today said Alwaleed will boost his Citigroup stake, his largest holding, to 5 percent, even after the shares fell more than 80 percent since Jan. 1.

“When people nail their colors to the mast in such an obvious way, if then it all blows up, then that’s very damaging to your reputation,” said Ken Murray, chairman of Blue Planet Investment Management in Edinburgh, who says he shorted shares in Citigroup last year.

Alwaleed and his companies are buying Citigroup shares because the prince believes they are “dramatically undervalued,” Kingdom Holding said in a news release. The combined stake stands at less than 4 percent after recent Citigroup share sales diluted the holding, Kingdom said.

“Prince Alwaleed is fully confident that Citigroup’s universal banking model and global franchise will make it a long- term winner in the financial services industry,” Kingdom said.

The announcement failed to halt Citigroup’s slide. The shares slumped 17 percent to $5.30 as of 10:10 a.m. in New York trading, extending this week’s drop to 45 percent on concern banks will post further losses next year as the economy falters.

[ucypmas]

The US government is unlikely to let a large money center bank like Citigroup to file for bankruptcy and stop operating parts of its businesses like Lehman. They would not risk a collapse in confidence by putting depositors / counterparties at risk (plus triggering another CDS earthquake) - not at this stage when confidence is still very fragile.

However it is entirely possible that should the situation be untenable and Citigroup is on the brink of failure, the regulators would swoop in, wipe out all common and preferred shareholders by forcing bondholders to take a haircut into new common shares, with massive injection of capital. Something like Fannie/Freddie, but far worse in terms of dilution.

Sometimes the market is correct, and sometimes it is wrong about companies. However the market did not see Bear, Lehman, Fannie, Freddie and AIG coming in the past six months. The jury is now out on Citigroup.

But fully agree that for those who can accept the risk, it is worth a short-term play.

[millionairemind]

Hello Ucypmas,

Welcome to Huatopedia.

I hope you have a good time here and we look forward to your many posts in the future.

Cheers,
mm

[millionairemind]

If Citi is taken over like AIG, our gahmen can kiss goodbye to the money they invested in Citi...

I am sure a high level minister will say - Lets Move On...

Citigroup May End Up With Government Rescue After Stock Skids
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.

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’s Conference Call

Citigroup CEO Vikram 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 at 4:08 p.m. in New York, 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 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.

TARP Funds

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.

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.

Deposits Are Safe

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.

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.

[blid2def]

Bad Bank idea mooted.

Full story (Wall Street Journal): http://online.wsj.com/article/SB122747680752551447.html

Teaser:

Bailout Talks Accelerate for Ailing Citigroup
Billions in Toxic Assets May Be Removed; New Phase for Government Bank Rescue

By DAVID ENRICH, CARRICK MOLLENKAMP and MATTHIAS RIEKER

The federal government was nearing an agreement Sunday night to rescue Citigroup Inc. by helping to remove billions of dollars in toxic assets from its balance sheet, people familiar with the talks say.

The agreement, which was still under discussion and could fall apart, would mark a new phase in government efforts to stabilize U.S. banks and securities firms. After injecting nearly $300 billion of capital into financial institutions, federal officials now appear to be willing to absorb bad assets, on a targeted basis, from specific institutions.

Citigroup is one of the world's best-known banking brands, with more than 200 million customer accounts in 106 countries. Its plunging stock price threatened to spook customers and imperil the bank.

If the government devises a successful rescue plan, it could help bring stability to the entire financial system. If it doesn't, even deeper doubts about the industry's future could spread.

The talks Sunday centered on the creation of what is sometimes called a "bad bank" -- an outside entity designed to hold some of a financial firm's worst assets. That structure would help Citigroup cleanse itself of billions of dollars in weak assets, these people said.

Under the terms being discussed with top Treasury Department and Federal Reserve officials, Citigroup would agree to absorb losses on assets covered by the agreement up to a certain threshold, people familiar with the matter said. The U.S. government would then absorb any additional losses, these people said. One person said the new entity is expected to hold about $50 billion of assets.

That would mean taxpayers could be on the hook if Citigroup's massive portfolios of mortgage, credit cards, commercial real-estate and big corporate loans continue to sour.

So, the whole idea, in two words is: buy time. Make the banks' balance sheets look better so they don't collapse outright, and keep buying time with taxpayers' money and hope that asset prices recover before the printing presses run out of ink.

[winston]

Infusion of US$20b... On CNBC