Citibank’s cloudy future
Is the ailing banking giant near bankruptcy or a break-up?
Citigroup: bailout, break-up, or buy-out?
(Imaginechina via AP Images)
What happened
Citigroup’s board is reportedly meeting Friday to discuss selling off pieces of the banking giant or even the whole company, among other options, after Citi’s stock fell 26 percent Thursday to below $5 a share, its lowest close since 1994. Citi was once the largest U.S. bank, with a market value of $274 billion; now it’s No. 5, worth about $26 billion. (Bloomberg)
What the commentators said
Clearly, people “are quickly losing faith in Citigroup,” said Mara Der Hovanesian in BusinessWeek online. The bank is “doing its best to calm investors," and one high-roller, Saudi Prince Alwaleed bin Talal, pledged Thursday to raise his stake by $350 million, to 5 percent. But the market is worried about Citi’s exposure to toxic assets, and many think “some sort of government intervention” will be needed.
How the government could help “is an open question,” said Dan Wilchins in Reuters. The U.S. Treasury has already invested $25 billion in Citi, and it could invest more to “soothe investors.” It could take an 80 percent stake, as with AIG; guarantee Citi’s debt; or force its liquidation or breakup, as with Washington Mutual.
CEO Vikram Pandit is already “dismantling parts of the company,” said Liz Moyer in Forbes online. He’s aiming to cut 52,000 jobs, half from selling off businesses. But Pandit isn’t keen on truly breaking up his megabank, and selling or spinning off major units “may be impossible,” anyway, in this market.
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6 Comments
Posted by Chuck, Friday, November 21, 2008, 8:56 am It's not toxic assets that's causing the devaluation of Citigroup, it's simply small minded investor panic. When the small minded stop acting like panicked lemmings then Citigroup and other institutions will swing back to valuation reality. Perhaps that time is just around the corner.
Posted by Chad, Friday, November 21, 2008, 9:24 am Chuck, perfect analysis.
Posted by Ex-Citibanker, Friday, November 21, 2008, 3:33 pm Citibank turns Shitibank, after Sandy Weill.
Posted by Angela, Friday, November 21, 2008, 4:14 pm Well, personally, $25 Billion is enough! No one is here helping me grow or save my small business, ergo, I can't pay my CitiBank loan. What goes around, comes around, at least that's what I was always told.
Posted by David , Sunday, November 23, 2008, 12:35 pm Citibank is a great bank. The problem is that it’s impossible to invest in this country anymore. Much of these problems are being caused by market manipulation (sharks in the water) and the lack of SEC action (the life guards). Don’t we want average people to be able invest in America? If you can’t invest in our banks, you can’t invest in anything.
Posted by Jennifer Morris, Sunday, November 23, 2008, 8:43 pm Calming down would help the banks and ourselves proceed rationally and reasonably. The dramatic 'sky is falling' approach is just making it worse.
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