Citigroup Gets Weekend Bailout
In a now familiar pattern Citigroup became the latest US financial institution to get bailed out over a weekend.
The US government announced a $20 billion cash injection Sunday, just a month after the bank got $25 of tax-payers funds to help keep it afloat.
In addition to the cash, the government also agreed to guarantee $306 billion of Citi's troubled mortgages and toxic assets.
The decision came after New York-based Citigroup’s tumbling share price sparked concern that depositors might pull their money and destabilize the company.
The bank, which two years ago was the biggest in the US by market value, has since slipped to No. 5 after racking up four straight quarterly losses totaling $20 billion.
Citigroup Shares Halve In Four Days
Citigroup's shares slumped 26 percent Thursday; the bank has lost half its value in just four days. The chief executive, Vikram Pandit, will hold a meeting for senior managers Friday to update them on the bank's condition. Some reports suggest that auctioning off parts of the bank, or even the whole thing may be on the agenda.
Meanwhile, at 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.
The bank has posted four consecutive quarters of losses, caused by billions in write-downs. Nine of its investment funds have cratered this year. And now the bank could face a tsunami of new losses in its once-lucrative consumer loan business as the global economy weakens.
However, senior executives say the company is financially strong and has ample financing options. Pandit has followed through on plans to aggressively shrink the company and control costs. The bank has sold tens of billions of dollars' worth of risky assets, improved its capital position and announced plans to eliminate 52,000 jobs by next June. "We are entering 2009 in a strong position, much stronger than we entered in 2008," Pandit said in a speech to employees this week.
Yet as the drumbeat of bad news about the bank grows louder, investors remain unconvinced.
Citigroup and Merrill Lynch shares plunge after downgrades
(Times Online) -- Shares in Merrill Lynch and Citigroup plunged Thursday as leading analysts cut their forecasts for both groups' second-quarter results on fears that each faces more huge hits from the credit crunch.
Citigroup's shares fell by $1.27, or 6.74 per cent, to $17.58 in early New York trading, their lowest value since October 1998. This came after William Tanona, a Goldman Sachs analyst, tripled the net loss he expects the group to make in its second quarter to 75 cents a share, or $3.75 billion (£1.9 billion).
Although this would be less than the $5.1 billion group loss that Citigroup reported for the first quarter, it would put the bank into the red for the third consecutive quarter.
Shares in Merrill Lynch tumbled by $1.82, or 5.13 per cent, to $33.64 in midday trading, as Brad Hintz, an influential analyst with Sanford Bernstein, changed his second-quarter forecast for the group from a 82 cents per share profit to a loss of 93 cents a share, or $832 million.
This compares with a $1.97 billion group loss for the previous three months and would mark Merrill's fourth consecutive quarterly loss.
The banks' falls helped the Dow Jones industrial average to sink below 11,740.15, its lowest closing level this year, which occurred in March. The index fell below its January intraday low of 11,634.18 in late morning trading and closed at 11,453.40, down 358.40.
Mr Tanona expects Citigroup to report a total of $8.9 billion in losses this quarter from the credit crunch, adding to the more than $46 billion of losses it has already made in the past year.
