Citigroup (C)

[HenryTo]

It is now officially Morgan Stanley's "top short idea" for 2008:

http://www.bloomberg.com/apps/news?pid=20601087&sid=aCQGvCjmAmrM&refer=home

[rffrydr]

Heavily speculated today:

Topping the most-active option list is Citigroup, which is seeing heavy put volume. The most active strike is the July $20 put, which has traded over 15,000 contracts in the first 30 minutes. But people are also going out to the 2010 LEAPs, in which 6,100 of the January $20 puts have traded thus far. While this is only 15% of the strike's prior open interest, the bulk of the volume was done in three 1,500 contract transactions at the $3.40 offer price, suggesting this is a new opening purchase.
_________________
Today is the Tomorrow you worried about Yesterday!

[HenryTo]

Deleveraging at Citigroup continues - as it attempts to sell its German retail operations for €4bn-€5bn ($6.2bn-$7.7bn), as part of Vikram Pandit's plan to sell $400 to $500 billion of its "non-core" assets.

http://www.ft.com/cms/s/0/ee39e578-234f-11dd-b214-000077b07658.html

[HenryTo]

Citigroup's Pandit finally presents his plans - calling for a significant deleveraging by aiming to sell $400 billion worth of its non-core assets.
-----------------------------------------------------------------------------------
Citi mulls up to $400 billion asset sales: source
Thursday May 8, 10:35 pm ET
By Joseph A. Giannone

NEW YORK (Reuters) - Citigroup Inc (NYSE:C - News) will present as much as $400 billion of "non-core" assets that can be sold by the bank when it meets investors and analysts on Friday, a person familiar with the situation said.

Newly-installed Chief Executive Vikram Pandit, scrambling to slash costs and assets hard hit by the credit crunch, also intends to reaffirm his promise to cut annual expenses by around a fifth, the source told Reuters on Thursday.

Citigroup declined to comment.

Since taking over in December from Charles Prince, who resigned under pressure after years of disappointing results, Pandit has presided over a bank reporting $15 billion of losses, one that raised more than $40 billion of new capital and cut its dividend by 41 percent.

Pandit has faced demands from investors to slash costs, shed poorly performing businesses and even split up the largest U.S. bank.

Yet in a four-hour presentation to analysts and investors on Friday, Pandit and other top executives are expected to fend off calls for a break-up, instead touting Citi's combination of consumer and institutional businesses.

Citi's balance sheet currently weighs in at more than $2.2 trillion, though much of that comprises businesses and trading positions outside its key businesses: commercial, consumer and investment banking.

Actual asset and business sales will take place over a period of years, according to the Financial Times which first reported the asset sales scope on its website on Thursday.

Pandit already has sold the bank's stake in CitiStreet benefits servicing venture, commercial leasing business CitiCapital and the Diners Club charge card business.

The Wall Street Journal this week reported Citi may sell Primerica, a consumer sales network for life insurance and investments.

Another highlight of the meeting will be plans to slash as much as $15 billion off operating expenses. Last Year, Citi's costs totaled more than $61 billion.

The bank has announced 13,200 job cuts in 2008, though analysts say tens of thousands of further cuts may be needed. The bank ended March with 369,000 employees.

[rffrydr]

...And blows it:

http://www.marketwatch.com/news/story/citigroup-risks-shame-going-market/story.aspx?guid=%7B6229F3AC%2D77AA%2D4976%2DA247%2D29C0397E05B0%7D
_________________
Today is the Tomorrow you worried about Yesterday!

[HenryTo]

Citigroup sells another $3 billion worth of stock:

http://www.bloomberg.com/apps/news?pid=20601087&sid=aQ5GMxE.cdLk&refer=home

[HenryTo]

The 15 largest capital injections since the beginning of the credit crisis. Note that this does not include the latest US$6 billion hybrid offering from Citigroup as well as a substantial (>$10 billion) capital raising plan from RBS.

----------------------------------------------------------------------------------
NEW YORK (Reuters) - Financial companies around the globe have scrambled to raise capital to offset massive write-offs. Below are the 15 largest capital infusions announced by financial institutions since the credit crisis began, totaling more than $150 billion. Firm Date Amount Source(s)

($Billion) Citigroup (C.N: Quote, Profile, Research) 12/21/07-1/15/08 29.65 Gov. Singapore (GIC), Kuwait IA, Abu Dhabi IA, Saudi Prince Alwaleed, Sandy Weill, (public Offer, preferred stock)

UBS (UBS.N: Quote, Profile, Research) 12/10/07-4/01/08 28.72* Rights issue to shareholders Gov. Singapore (GIC) Undisclosed Mideast Investor

Merrill Lynch MER.Ni 12/24/07-1/15/08 12.20 Korean IA (Convertible preferred), Kuwait IA,(Convertible preferred) Mizuho Bank,(Convertible preferred) Temasek (Common Stock) Davis Selected Advisors (Common stock)

Wachovia (WB.N: Quote, Profile, Research) 2/6/08-4/17/08 11.55 (Preferred Stock)

WaMu (WM.N: Quote, Profile, Research) 12/12/08-4/8/08 9.90 TPG Capital, Equity Sale, (Common and convertible preferred)

Fannie Mae (FNM.N: Quote, Profile, Research) 9/25/07-12/6/07 8.875 (Preferred Stock)

Soc Gen (SOGN.PA: Quote, Profile, Research) 3/11/08 8.45 Share issue to existing shareholders

Freddie Mac (FRE.N: Quote, Profile, Research) 4/10/07-11/27/07 7.00 (Preferred stock)

National City (NCC.N: Quote, Profile, Research) 4/21/08 7.00 Corsair Capital Ontario Teachers Pension Plan, MSD Capital LP. (Convertible preferred stock.)

WestLB WDLG.UL 1/21/08-2/7/08 5.86 North Rhine-Westphalia (Guarantees)

Barclays (BARC.L: Quote, Profile, Research) 7/23/07 6.14 China Development Bank Temasek

JPMorgan (JPM.N: Quote, Profile, Research) 4/17/08 6.00 (Noncumulative perpetual preferred stock)

Morgan Stanley (MS.N: Quote, Profile, Research) 12/27/07 5.57 China Investment Corp (Convertible stock)

Lehman (LEH.N: Quote, Profile, Research) 4/2/08 4.00 (Preferred Stock)

CIBC (CM.TO: Quote, Profile, Research) 1/14/08 2.69 Manulife, Caisse de Depot, Cheung Kong, OMERS Corp, Public Stock Offer

* Figure includes a proposed $15 billion rights issue Sources: Reuters, Lehman Brothers (Reporting by Steven Bertoni; Editing by Andre Grenon)

[HenryTo]

As expected, Citigroup is seeking to raise another $6 billion through the sale of hybrid bonds:

http://www.bloomberg.com/apps/news?pid=20601087&sid=aX.5BgUUV54k&refer=home

[Rubedo]

http://globaleconomicanalysis.blogspot.com/2008/04/citigroup-rbs-barclays-others-short-of.html


Citigroup, RBS, Barclays, others, Short of Capital

In spite of all the "bottom is in" cheering in recent weeks, Shareholders' Relief May Not Last as Citigroup Citigroup Capital Dwindles.

Citigroup Inc.'s investors, cheered by a $5.1 billion first-quarter loss that wasn't as big as they feared, now must watch out for asset sales, a dividend cut and an infusion of outside investment as the bank's capital dwindles.

My Comment: Citigroup will have no choice but to cut the dividend again.

Citigroup's so-called Tier 1 capital ratio -- a measure of its ability to withstand loan losses -- fell to 7.7 percent at the end of March, the New York-based bank said yesterday. Citigroup says it needs a 7.5 percent ratio to provide a margin of safety and preserve its credit ratings.

"We're in a recession, they have a huge consumer book, and there's huge double-digit-billion provisions that they're going to have to take in the next 18 months to two years," CreditSights Inc. analyst David Hendler said. "They're undercapitalized for their risk."

A weakening U.S. economy and rising consumer delinquencies have forced Chief Executive Officer Vikram Pandit and Chief Financial Officer Gary Crittenden to back away from assurances earlier this year that the bank didn't need to raise more capital. In January, Crittenden said Citigroup "stress-tested" its assumptions under "multiple recessionary scenarios."

My Comment: It looks like Citi is applied wimpy amounts of stress in January given the stress tests have already failed.

Citigroup raised capital in December and January by selling stakes to investment funds controlled by foreign governments including Abu Dhabi, Korea and Kuwait. The infusion helped boost Citigroup's Tier 1 ratio to 8.8 percent by Jan. 22 from 7.1 percent at the end of the year.

Yesterday Pandit said he's selling assets and shedding units outside the retail banking, trading, investment-banking and transaction-processing businesses. He's cutting about 9,000 jobs over the next year, on top of 4,200 announced in January.

My Comment: 8.8% is now 7.7% and shrinking. Citigroup will soon need to sell more assets or cut its dividend or both. I predict both.

Is Citigroup's Dividend Safe?

Dateline March 5, 2008: Olstein Capital Management says Citigroup Shares May Double in 2 Years and dividend is safe.

"Even though there's bad news still to come in Citibank, it's discounted already," said Robert Olstein, who oversees about $1.3 billion as chairman of Olstein Capital Management. "This stock in two years is going to be in the mid-40s. You've got to be forward looking."

"They're not cutting the dividend and they are not going to go back for more capital," Olstein, whose firm owns 1.7 million Citigroup shares, said after U.S. exchanges closed today. "They're OK."

For a discussion of Citigroup's dividend please see Is Citigroup's Dividend Safe?

Citigroup has been borrowing money at 6.875% and higher while paying approximately $6.6 billion annually in dividends. This is not a viable long term strategy.

Paying dividends in this situation does not make economic sense. It only makes sense in the twisted logic of attempting to support share prices short term. Having built up a false impression that no further dividend cut is coming, the market reaction will be that much worse when it does come. That is the mistake all these companies make attempting to manage earnings and growth over the short term.

Capital Problems at RBS, Barclays, HBOS, others.

The Telegraph is reporting Royal Bank of Scotland will spur others to go cap in hand.

Britain's banks have been in denial. As one shareholder put it: "All of them agree that the industry as a whole needs to be better capitalised but none believes the observation applies to them individually."

Royal Bank of Scotland may need capital more urgently than most, but its decision to tap shareholders makes it easier for rivals to follow suit.

Analysts believe Barclays and HBOS, at the very least, will have to give it serious thought. Credit Suisse reckons Barclays could do with £6bn of capital and HBOS £4.5bn, compared with the £12bn it says RBS needs.

Political pressure for the banks to strengthen their finances, as a "quid pro quo" for the £50bn-£100bn of liquidity support the Government is planning, might tip the scales. Both HBOS and Barclays have been in contact with regulators about their capital positions.

With sub-prime provisions worsening and bad debts on UK mortgages certain to rise as house prices stumble and mortgage costs soar, the banks have been told they need to be in as strong a position as possible.

As the tables show, Barclays and HBOS have the weakest capital positions after RBS. Barclays, in particular, is exposed to worsening sub-prime conditions that threaten its capital. [click on chart to enlarge]

For them, the issue may be whether to sell assets or to go to shareholders. As is thought to be the case with RBS, a rights issue would be accompanied by a dividend cut, making it a far less attractive option. But the scale of the funds Credit Suisse estimates the two lenders require would suggest they have little choice.

Alliance & Leicester and Bradford & Bingley are considered next at risk. Although B&B has a strong capital position, analysts expect its mortgage bad debts to mount rapidly as it is a specialist in buy-to-let and self-certification, areas of the market considered higher risk.

Thanks to the Telegraph for that snip. There is a larger version of the above chart and other discussion in the original article that inquiring minds may wish to consider.

Dividend Cuts Under Discussion

Dividend cuts are now under discussion at several banks in Europe and probably more. Note that the Tier 1 capital ratios are worse at Royal Bank of Scotland - 4%, Barclays - 4.8% , HBOS - 5.7% , Lloyds TSB - 7.3%, and Alliance & Leicester - 6.9% than at Citigroup - 7.7%.

Of course the next question is how much level 3 assets, SIVs, and other off balance sheet garbage are the above hiding? Whatever it is, things do not look good for the entire group. Dividend cuts and more capital raising is in store for all of the above as the recession deepens.

[rffrydr]

Unloads leveraged loans to aisia:

http://www.ft.com/cms/s/314ec50a-05a4-11dd-a9e0-0000779fd2ac,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2F314ec50a-05a4-11dd-a9e0-0000779fd2ac.html&_i_referer=http%3A%2F%2Fwww.ft.com%2Fhome%2Fus
_________________
Today is the Tomorrow you worried about Yesterday!

[HenryTo]

Citigroup quietly raises $4.5 billion in a 5-year note sale:

http://www.bloomberg.com/apps/news?pid=20601087&sid=aWOb1BofFWfs&refer=worldwide

[HenryTo]

As expected, Citigroup continues to sell assets on the commercial bank side to raise cash:

http://online.wsj.com/article/SB120474701124114365.html?mod=yahoo_hs&ru=yahoo

[rffrydr]

The Great Believer speaks:

http://www.cnbc.com/id/15840232?video=624755222&play=1

What he calls "fiction" the old Morgan called "trust."--and it's chisled on the side of the building on Wall Street--NY
_________________
Today is the Tomorrow you worried about Yesterday!

[rffrydr]

Well...shut my mouth:

http://www.marketwatch.com/news/story/moodys-citi-downgrade-no-reflection/story.aspx?guid=%7B3EC77313%2DFF3B%2D4A7A%2D92D7%2DDF125DACCFA1%7D&dist=hplatest
_________________
Today is the Tomorrow you worried about Yesterday!

[rffrydr]

Moody's still covering it's ass-existence.

Citi's taking back of 49billion (which they didn't, but guaranteed funding if nec...which becuause of this they all won't) will be seen as a net postive if the FEDs auctions come off alright. This news also pretty much kills the Super-SIV. But that's a good thing since it was seen as the Citi bailout plan anyway. That C can take this onto its books can be positive for the financials in general which will help C in the long run.
_________________
Today is the Tomorrow you worried about Yesterday!

[HenryTo]

Citigroup is to Aa3 from Aa2 by Moody's:

http://www.bloomberg.com/apps/news?pid=20601087&sid=a6NCmQUpfmg4&refer=home