Robert Rubin, Citibank: “There are no plans to cut the dividend.”

Chuck Prince quit as chairman and chief executive of Citigroup on Sunday night as the company revealed it was facing between $8bn and $11bn of further losses on its holdings of mortgage-related securities. Mr Prince said that in the light of the losses stepping down was “the only honourable course”. Robert Rubin, the former US Treasury secretary who will take over as chairman, said: “There are no plans to cut the dividend.” Sir Win Bischoff, former head of Schroders and now chairman of Citi Europe, will serve as interim chief executive. The latest bad turn in the credit turmoil was, in Mr Prince’s case, coupled with a serious erosion of good will, notes Lex. Diversification may not have been the boon it should theoretically be, but that does not make a Citi split the next obvious thing to do. Visit FT Alphaville on Monday for a comprehensive look at the Citi saga.

http://ftalphaville.ft.com/

No dividend cut. Everything else just noise...

 

Diversification doesn't matter when everything is correlated.

 

Speaking about correlation :

As clear as alphabet soup: banks' CDO exposures

Forget the banks’ Q3s. By any account, they’re billions of dollars out of date. For banks holding CDOs - and that’s most of Wall Street - writedowns will have greatly increased in the past three weeks.

The trouble is, no one, not even the SEC, know exactly what banks’ exposures are. But the losses are beginning to come out of the woodwork: for Citi, in the news Monday, a $8bn-$10bn loss on the value of some assets. For Merrill Lynch, last week, it worked out at $8bn. For UBS, reporting their Q3s last week, $3.4bn.

Citi have painted the most comprehensive picture to date. But rather than making things clearer, it simply casts doubt on the other banks’ disclosures. Citi, for example, are report $8-10bn writedowns on a portfolio containing $10bn of high-grade CDO paper - which has been the principal faller in the past two weeks. But UBS only report writedowns of $3.4bn. And they hold $20bn of high-grade CDO paper.

There are very few proxies which can be used to judge banks’ CDO holdings. Even a league table of CDO deals arranged is a pretty poor indicator:



An added complication is the fact that banks are using wildly different estimates on the pricing of CDO assets. Although indices such as the ABX and TABX are valuable proxies for the market’s prices as a whole, they don’t necessarily reflect where banks individually are pricing their debt.

As reported in today’s FT, for example, Merrill Lynch, has written down mid-quality ABX debt to 63 cents in the dollar, even though the bank’s own analysts say its worth only 40. UBS, meanwhile, assumes the same debt to be worth 90 cents in the dollar. “Simple math would imply that UBS needs an additional $8bn write-down [on its $15.4bn holdings] if the ABX pricing is correct,” Merrill themselves had the cheek to point out in a report on their rival.

Here’s a breakdown of the main CDO exposures:

Citi
$10bn senior rated CDO debt
$8bn mezzanine CDO debt
$2.7bn “warehoused” CDOs
£200m CDO squared

Merrill Lynch
$8.3bn senior rated CDO debt
$5.3bn mezzanine CDO debt
$1bn “warehoused” CDO debt
$600m CDO squared

UBS
$20.2bn senior rated CDO debt
$1.8bn warehoused CDO debt

Total exposure undisclosed:

Bank of America
Undisclosed

Barclays
Q3s due November 27

Deutsche
$1.6bn on “trading activities in relative value trading in both debt and equity, CDO correlation trading and residential mortgage-backed securities.”

JPMorgan
$339m (net of hedges) “on collateralized debt obligation (CDO) warehouses and unsold positions.”

Lehman Brothers
Undisclosed

Morgan Stanley
Undisclosed

Wachovia
$534m writedown on CDOs

http://ftalphaville.ft.com/

 

ASusilovic, are you intending to go long anytime soon? I'm toying with the idea of buying step by step the more the stock drops. Citi is not going bankrupt!

 

Take a look at that dividend now with the stock down from its high of 55s. :eek:

http://www.indexarb.com/dividendYieldSorteddj.html

No way Rubin or whoever takes over can cut it in the face of that decimation of shareholder value. Dividend is all they have left.

 

Citigroup Default Swaps Rise to Record on Writedowns

Nov. 5 (Bloomberg) -- The risk of Citigroup Inc. defaulting on its debt rose to a record after the biggest U.S. bank by assets said that subprime mortgages and related securities lost as much as $11 billion of their value in the past month.

Credit-default swaps on the New York-based lender opened 8 basis points higher at 80 basis points, according to prices from Lehman Brothers Holdings Inc. The contracts, which rise as perceptions of credit quality worsen, have increased from as little as 10 basis points in June and last traded at 73 basis points at 8 a.m. in New York.

I like these kind of headlines...

 

I just listened to the CITI conference call and most crucial issue has been cash flow generation in regards to dividend payment. Gary Crittenden confirmed : no dividend cut and large cash flow generation !

 

Dividands are pointless. The stocks drops exectly the same percerntage of the divided and it is a pain in the ass having to reinvest the dividends. .

 

I disagree. You want to be long C - not short. Not only is there the div. argument being missed but also that it is a depositary bank - not just an IB, plus has diversified financial services. It will be accumulated but from where I can't say.

 

I initiated my long position today (but not intending to further accumulate for a while). It's supposed to be a position that keeps me reminded of the stock price. The sub-prime mess or any financial turmoil for that matter is not going to rattle Citigroup out of existence so as long as the price makes big drops I'll be there to buy more as Citigroup will eventually emerge supremely strengthened.