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Citigroup may
need cash as losses mount
Will
McSheehy & Matthew Brown
Bloomberg
5 Mar
08
http://www.bloomberg.com/apps/news?pid...
Citigroup
Inc., the biggest U.S. bank, may need additional capital from
outside investors as losses stemming from the collapse of the
U.S. subprime mortgage market increase, the head of Dubai
International Capital LLC said.
Citigroup received $7.5
billion in November from Dubai's neighbor, Abu Dhabi, after
record mortgage losses wiped out almost half the company's market
value and led to the departure of Chief Executive Officer Charles
Prince. The New York-based company said in January it was getting
another $14.5 billion from investors, including the governments
of Singapore and Kuwait.
"It will take a lot more
than that to rescue Citi and other financial institutions,'' said
Sameer al-Ansari, the chief executive officer of Dubai
International, at a private-equity conference in Dubai today.
Dubai International is among the investment funds controlled by
Dubai ruler Sheikh Mohammed bin Rashid al-Maktoum.
Citigroup
probably will report a first-quarter loss of $1.66 a share after
$15 billion of mortgage-related writedowns, Merrill Lynch &
Co. analyst Guy Moszkowski said in a report issued today. The
company also may have $3 billion of markdowns from loans used to
finance leveraged buyouts and commercial real estate, Moszkowski
estimates.
Sovereign
Funds
Citigroup
slumped 54 percent in New York trading during the past 12 months.
The stock fell 94 cents today to $22.15 in composite trading on
the New York Stock Exchange at 10 a.m.
Moszkowski also
cut his earnings estimates today for Bank of America Corp., the
second-largest U.S. bank by assets, and Wachovia Corp., the
country's No. 4 bank, because of the deteriorating credit
markets. Both companies are based in Charlotte, North Carolina.
Arab states led by Qatar, Kuwait and the United Arab
Emirates, which are loaded with cash from record oil and gas
revenue, have purchased stakes in U.S. and European financial
institutions, including Merrill Lynch & Co., Morgan Stanley
and UBS AG, as losses mounted from the U.S. mortgage market.
In
all, banks and securities firms have raised about $105 billion
from sovereign wealth funds, governments and public investors,
according to data compiled by Bloomberg. Dubai International has
invested in companies including London-based HSBC Holdings Plc,
Europe's biggest bank by market value, and New York-based hedge
fund Och-Ziff Capital Management Group LLC.
"Gulf
sovereign wealth funds will continue to be interested in the
major U.S. financial institutions,'' said Giyas Gokkent, the head
of research at National Bank of Abu Dhabi, the third- largest
bank in the United Arab Emirates by market value. "The scope
for investments is going to be more limited than what we have
seen so far.''
Prince Alwaleed Qatari Prime Minister
Sheikh Hamad bin Jasim bin Jaber al- Thani said Feb. 18 that the
emirate is buying shares of Zurich- based Credit Suisse Group and
plans to spend as much as $15 billion on European and U.S. bank
stocks in the next year.
Abu Dhabi is Citigroup's largest
shareholder, ahead of Los Angeles-based Capital Group Cos. and
Saudi billionaire Prince Alwaleed bin Talal, Bloomberg data show.
The assets of state-managed funds have increased to $3.2
trillion, fueled by record oil prices and rising currency
reserves. Analysts at New York-based Morgan Stanley estimate the
funds' assets will reach $12 trillion by 2015.
To
contact the reporters on this story: Will McSheehy in Dubai at
wmcsheehy@bloomberg.net;
Matthew Brown in Dubai at mbrown42@bloomberg.net.
Citi
hits new low
Colin
Barr
CNN Money
5 Mar
08
http://dailybriefing.blogs.fortune.cnn.com/2008/03/04/citi-hits...
Citi
(C) sank 6% to a nine-year low amid rising worries about the
banking giant’s financial health. Analyst Guy Moszkowski at
Merrill Lynch cut his 2008 earnings estimate to 24 cents a share
from $2.74, citing billions of dollars in subprime-related
writedowns and other problems, starting with the U.S. consumer.
"We remain concerned about loss provision potential, the
direction of long-term strategy, and weak markets for the Capital
Markets businesses," Moszkowski writes.
Concerns
about Citi are widespread. CNBC reports the bank could be forced
to cut more than 30,000 jobs - up from a previously announced
plan to cut 24,000 positions - in a bid to bring expenses back in
line with revenue. The CEO of Dubai’s sovereign wealth fund
believes the $22 billion Citi has raised recently won’t be
enough to keep the bank from going back to the markets for more
capital soon.
The
good news, such as it is, is that with the stock trading around
$22 - down from $55 last summer - Citi is trading roughly on par
with book value on a pro forma basis, Mozkowski writes, adjusted
for an expected first-quarter loss and recent capital-raising
activity. While there’s no telling how much further Citi
shares might fall, a bank stock trading at book value can expect
to start attracting at least some attention from value-minded
investors.
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