Tags: citigroup

Citigroup's Woes Far From Over

By    |   Friday, 14 Nov 2008 11:05 AM

With its shares falling below $9 a share for the first time since 1996 and pressure increasing on Chief Executive Vikram Pandit and the bank's board, including Chairman Sir Win Bischoff, to improve performance, Citigroup's problems may be far from over.

"While people once thought Citigroup was somewhat insulated from U.S. shocks because of its global exposure, it now has vulnerability because of that same global exposure. What was once viewed a positive is now a negative," Marshall Front, president, Front Barnett Associates, told the Guardian.

Last month, Citi lost out at the last minute on a bid to acquire Wachovia to Wells Fargo. The Wells-Wachovia deal was valued at $13 billion, which was much higher that Citigroup's offer to acquire Wachovia's banking operations for $2.16 billion.

According to The Wall Street Journal, Citigroup is cutting at least 10,000 jobs in its investment bank and other divisions worldwide.

In addition, Citigroup Chief Executive Vikram Pandit has instructed managers to cut their budgets for employee compensation by at least 25 percent.

Last month, the bank announced it cut 11,000 jobs in the third quarter. That brings the total number of job cuts in 2008 to 22,000.

Citigroup's target is to shrink its workforce to about 290,000 employees by 2009 from 352,000, as of Sept. 30.

"Citi doesn't have a credible management team, they don't have a credible board," Christopher Walen, managing partner at Institutional Risk Analytics told The New York Times.

"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."

Citigroup has already received a $25 billion rescue from the federal government.

According to the Times, Citigroup is also dealing with trying to decide how to position its domestic consumer business, which faces rising loan losses.

The Wall Street Journal reported that the bank is notifying some credit card customers that their interest rates are being raised by an average of 3 percentage points.

Oppenheimer & Co. Analyst Meredith Whitney told the Guardian that she doesn't see Citigroup making any money over the next couple of years.

"They will have capital pressures from losing money. They will have capital pressures from resizing the business. What Citi and others are going to continue to do is sell assets to raise capital," she said.

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With its shares falling below $9 a share for the first time since 1996 and pressure increasing on Chief Executive Vikram Pandit and the bank's board, including Chairman Sir Win Bischoff, to improve performance, Citigroup's problems may be far from over."While people once...
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Friday, 14 Nov 2008 11:05 AM
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