"Investors were rattled by [Citigroup's] announcement that it will buy the last $17.4 billion in assets held by its structured investment vehicles, which were among the first casualties when the credit crunch hit last year. ... As Citigroup's stock fell Wednesday, executives instructed traders, financial advisers and other employees to reach out to key clients to reassure them about the company's health. ... Tanya Azarch's, a credit analyst at Standard & Poor's, says the federal government had made a 'broad expression of support.' ... 'As we're watching the deterioration here of the market ... it makes us think that the mark-to-market writeoffs are not over yet,' she adds. Such write-offs, which reflect the dwindling value of assets Citigroup is holding, have already cost Citigroup tens of billions of dollars this year", David Enrich at the WSJ, 20 November 2008.
"The market is losing confidence in Citigroup. In the wake of some planned balance-sheet maneuvers, it isn't tough to see why. ... Largely overlooked in presentation materials released to investors was a disclosure that this quarter the firm would reclassify about $80 billion in assets. Those assets wouldn't have to be marked to market prices. Or they could be be held in way that keeps losses from hitting earnings. ... Mr. Pandit's rationale for the move: The assets could eventually bounce back in value. Investors have heard that one before and don't believe it. If anything, the move has only made investors more skeptical about Citigroup's ability to withstand mounting losses. The bank says its sufficiently capitalized", David Reilly at the WSJ, 20 November 2008.
"With even the largest vessels now vulnerable to pirates, these are dangerous times for shipping. The same goes for financial supertankers such as Citigroup. ... Dozens of new managers have been brought in, some of them old colleagues of Mr. Pandit's from his days at Morgan Stanley. Risk management has been spruced up. Treasury has been centralised, to ensure that capital is allocated more efficiently. ... The big question is whether Citi, which has already raised $75 billion in equity, a third of it from the government, will need more. ... And Citi may yet have to bring a portion of its $1.2 trillion in off-balance-sheet assets onto its books under proposed accounting rules. ... Though the American government would not allow Citi to fail, the idea that it will need further state support, or will need to be rescued by another bank, no longer seems fanciful", my emphasis, Economist, 20 November 2008, link: http://www.economist.com/finance/PrinterFriendly.cfm?story_id=12652263.
"Citigroup hopes the government makes a public expression of confidence in Citigroup that would help reassure clients and customers. Mr. Pandit told employees that Citigroup has 'a fantastic business model.' But executives haven't ruled out a possible sale or breakup of Citigroup if there is no alternative, according to people familiar with the matter", David Enrich at the WSJ, 22 November 2008.
Quoted without comment.
I applaud Royal Bank's move but wonder: what was it doing all along?
Things go from bad to worse at Citigroup. On 7 July 2008 "C" was $17.34; on 20 November 2008, $4.71; a 73% decrease in 4.5 months. Great work $800 million man.
Yes, Uncle Sam will keep Citi afloat, no matter what. I ask the question I've asked before: what kind of cost accounting did Citi have that now it's improving its risk management and capital allocation process? What was its prior management being paid for?
That Citigroup's $800 million man thinks he needs government expressions "of confidence", tells me Citigroup is insolvent. Absent further bailouts, Citigroup is finished.
Citigroup been singing this song for months. See my 7 and 17 July 2008 posts:http://skepticaltexascpa.blogspot.com/2008/07/citis-800-million-man-speaks.html.