Showing posts with label Citibank. Show all posts
Showing posts with label Citibank. Show all posts

Wednesday, March 05, 2008

Every bank collapse has a silver lining

Yes, Citibank may go down the tubes, sucking God knows what else down with it, with this Associated Press story reporting that a Persian Gulf bailout may not be enough to offset a subprime-sized hole in the bow.
Citigroup shares sank about 6 percent to their lowest level in more than nine years, as stockholders recoiled at forecasts of more losses at the troubled bank and comments from a Middle East fund executive that Citi must raise more cash to stay in business.

Samir al-Ansari, chief executive of the $13 billion government-owned investment firm Dubai International Capital, said Tuesday at a private equity conference that it will take more than the combined efforts of the Gulf’s wealthiest investors — the Abu Dhabi Investment Authority, the Kuwait Investment Authority and Saudi Prince Alwaleed bin Talal — to save Citigroup.

Back in January, Citi raised $12.5 billion from a group of investors including the Kuwait Investment Authority, the Government of Singapore Investment Corp. and Prince Alwaleed. And last year, Citi nabbed $7.6 billion from the Abu Dhabi Investment Authority, a sovereign wealth fund owned by the ruling elite of the United Arab Emirates, the world’s fourth-largest oil exporter, in return for a 4.9 percent stake.


Citigroup shares — which have shed about 50 percent since the credit markets froze up last summer — dropped another 5.6 percent to $21.80 in early afternoon trading Tuesday on the New York Stock Exchange.

In January, Citigroup reported losses of almost $10 billion in the fourth quarter, spurred by $18 billion in write-downs. In addition to capital injections from sovereign wealth funds, the bank has been raising cash through small asset sales of nonessential assets and nearly halving its dividend in January.

“Not only do they need to raise more money, but they should’ve suspended their dividend six months ago,” said Christopher Whalen, managing director of consulting firm Institutional Risk Analytics. “They’re trying to do this in bite-size pieces. But everyone’s still waiting for the other shoe to drop.”

Citi Chief Financial Officer Gary Crittenden said in January the $12.5 billion stake, along with a $2 billion stock sale the bank completed soon afterward, was enough to address “potential capital shortfall under multiple scenarios.”

“They’re saying it’s enough — it’s not enough,” Whalen said, noting that further losses from consumer debt will draw down Citi’s cash levels.
THAT would be bad.

On the other hand, if Citi goes bust, we'll all get a lot less junk mail hawking credit cards we don't want and can't afford to have.

Many trees, alas, could be saved -- living another day to suck greenhouse gases out of the atmosphere. You have to like that, at least.