Worst Yet to Come for Citigroup

Discussion in 'Stocks' started by ByLoSellHi, Nov 13, 2008.

  1. http://www.nytimes.com/2008/11/14/business/14place.html?_r=1&oref=slogin

    Worst May Be Yet to Come for Citigroup

    By ERIC DASH
    Published: November 13, 2008


    After a year of red ink, a months-long plunge in its share price and a $25 billion government rescue, you might think the worst was over for Citigroup.

    It is probably not.

    Citigroup, which a decade ago set out to rewrite the rules of American finance, is bracing for still more pain now that a recession is at hand. Loans that the financial giant made to consumers in good times are going bad in growing numbers. For the moment, profits seem as elusive as ever, analysts say.

    Once the most valuable financial company in America, Citigroup is withering along with its share price, which this week sank into single digits for the first time in a dozen years. The company is also shrinking in another painful way: by cutting, and cutting, and cutting jobs. Another round of pink slips is expected next week.

    As Vikram S. Pandit completes his first year as chief executive, many analysts say Citigroup has lost its way. Insiders say the company is racked by office politics at a critical moment in its history.

    Mr. Pandit is struggling to regain his grip on the company, which operates in scores of countries, after his attempt to buy Wachovia was upended by Wells Fargo. That misstep left Citigroup grasping for a new strategy to lure deposits and build up its branch network in the United States.

    “Citi doesn’t have a credible management team, they don’t have a credible board,” said Christopher Whalen, managing partner at Institutional Risk Analytics. “If you look at their loss rate, it is almost inevitable that Citi is going to be asking the government for more money next year.”

    Worries about Citigroup’s future were apparent in the stock market on Thursday. While the share prices of many of its rivals soared along with the broader market in a stunning afternoon rally, Citigroup’s stock fell nearly 2 percent by the end of regular trading. At its closing price of $9.45, the stock has lost almost 68 percent this year, making it the third-biggest loser in the Dow Jones industrial average, behind Alcoa and General Motors.

    Many Citigroup employees know their jobs are on the line. Executives said that as of the third quarter, the bank had announced plans to eliminate 40,100 jobs. That includes reductions resulting from the divestitures of the company’s German retail banking operations and its Indian outsourcing franchise.

    But Citigroup still needs to hand out pink slips to 9,100 workers to meet its goals, and bankers are bracing for much of the bad news to arrive early next week, according to executives briefed on the situation.

    Investment bankers are expected to bear the brunt of the cuts because senior managers have been asked to reduce expenses significantly. But back-office functions, like the bank’s legal and human resources divisions, are also expected to be hard hit.

    The ax could keep falling. While there are no formal plans for further job cuts, executives say it is possible that Citigroup could shed an additional 25 percent of its work force by the end of next year. Such a reduction would include layoffs, a hiring freeze and work force reductions related to businesses that the company is considering selling. Such a move would reduce the total number of employees to 264,000, from about 352,000 today.

    Christina Pretto, a Citigroup spokeswoman, said that the bank was carefully managing its employee levels as it revamps the company to operate more efficiently in the current downturn. “Nothing has changed,” Ms. Pretto said.

    Citigroup is also grappling with how to position its domestic consumer business, which faces rising loan losses and, analysts say, lacks the leadership and strategy it needs. Having lost Wachovia, Citigroup must now try to stitch together a group of small regional banks to catch up with Bank of America, JPMorgan Chase and Wells Fargo. Executives are looking at Chevy Chase Bank, a small lender in Maryland with $14 billion in assets, among several other institutions, according to people close to the situation.

    But assembling a large franchise could take years, and digesting deals has never been one of Citigroup’s strengths.

    Even with all these problems, Citigroup’s board has been bickering over seemingly small issues, including which white-shoe law firm will represent it, according to a person close to the situation. Wachtell, Lipton Rosen & Katz had been representing the board, but that firm is representing Well Fargo in litigation over the Wachovia deal. Cravath, Swain & Moore is now being considered to represent Citigroup’s directors, but no decision has been made, according to a person close to the situation.

    Citigroup has tried to put on a united front amid the turmoil. Richard D. Parsons, one of the company’s most outspoken directors, said on Thursday that the board was fully behind Mr. Pandit and Winfried F. W. Bischoff, its executive chairman, as it braced for a difficult 2009.

    Mr. Pandit, for his part, led a group of Citigroup executives in buying 1.3 million Citigroup shares as the stock tumbled on Thursday.

    It was the first time that Mr. Pandit, who had collected $165.2 million from selling his hedge fund to Citigroup before becoming chief executive, publicly disclosed using his own money to buy Citigroup stock.

    Ms. Pretto, the Citigroup spokeswoman, said the “purchases reflect their belief in the long-term strength and growth opportunities of the company.”
     
  2. Jim Rogers will need to lower his $5 bid?
     
  3. This stock has looked like crap.

    Where there's smoke there's fire.

    When Citi finally cracks this market will head south in big chunks.
     
  4. Insiders say f-you...

    SAN FRANCISCO (MarketWatch) -- Citigroup Inc. executives bought up large chunks of the company's stock Thursday as shares dropped to levels not seen since the mid-1990s.
    Chief Executive Vikram Pandit acquired roughly 750,000 shares of the firm's common stock at prices between $8.92 and $9.45, according to a filing with the Securities & Exchange Commission.
    In addition, institutional clients group head John Havens acquired 250,000 shares, according to a report in the online edition of The Wall Street Journal.

    http://www.marketwatch.com/news/sto...x?guid={9A098627-13F2-4ABD-BABC-6CCAAD141B5F}
     
  5. Bought with Citi loan funded and backed by taxpayer bailout $$$$
     
  6. AK100

    AK100

    Bet that Arab Sheik who bought at $5 10-15 years ago has lost more of his net worth than Adelson of Las vegas Sands.

    Bet he's lucky to have $1billion left.

    Bought a lot of flashy assets, probably overpaid like the Arabs always seem to do.

    How the mightly have been humbled in this mess...........
     
  7. Norlan

    Norlan

    ha, C is up for +0.15 at 9.60 during pre-market, guess the worst is yet to come
     
  8. CITI is going to get hammered with bad loans and not to mention LOTS OF CREDIT CARD DELINQUENCIES. I personally know someone who says he was about 18k in CITI credit card debt that he just cannot pay. he is broke and used the card to pay for utility bills and things like that,i am not kidding. he can't pay and basically told them to screw off. how many others are in the same boat? he did'nt go on a buying spree for tv's or anything like that,it just added up quickly when he lost his job last year.
     
  9. citicorpse
     
  10. his dividends haven't been so bad for the past decade
     
    #10     Nov 14, 2008