With Citigroup (C) apparently up for sale either in part or whole, rumors were swirling Friday morning regarding which entity(s) would be likely suitors. The one which might make the most sense is Goldman Sachs (GS), not the least reason being that the new bank could be named “Sachs And The Citi.”
Rumors regarding a merger/takeover/sale of Citigroup are helping European shares rebound and providing a boost to U.S. futures as well, which as of 05:30 EST were up about 4.5%. The rumors have also helped cause a shift in the currency market back to risk-acceptance mode, as the euro, pound and Australian dollar move higher against the dollar as the yen is sold.
According the WSJ, Citi’s record 26% one-day plunge has officials of the firm believing “they need to reckon with a range of scenarios that were unthinkable only weeks ago.”
“The situation should not be taken Citigroup's board and management are backing down from their insistence that the New York company has ample capital,” according to the article. A board meeting was scheduled for Friday to discuss Citi’s options.
A Citigroup spokeswoman said in a statement Thursday evening: "Citi has a very strong capital and liquidity position" and is "focused on executing our strategy," which includes cutting expenses and selling assets. "We believe the benefits will be seen over time."
Conspiracy theorists will no doubt be making a connection here with former Goldman head and present Treasury Secretary Hank Paulson’s decision last week to not use TARP funds to buy troubled assets from banks as originally intended. Citi has billions of dollars worth of these battered securities on its books.
However, Citigroup has been far from the only bank which has seen its shares plunge since the change in Treasury’s tactics. J.P. Morgan Chase (JPM) shares slid 18% on Thursday, while Bank of America fell 14%.
Another option for Citi, according the WSJ,
could be a sale of one or more of its parts, such as its Smith Barney retail brokerage, the global credit-card division or the transaction-services unit, which is one of Citigroup's most lucrative and fast-growing businesses.
Early Thursday, Saudi Arabian investor Prince Alwaleed bin Talal bin Abdulaziz Al Saud that he would be increasing his holdings in Citigroup to 5%, adding that he remained a strong supporter of its management.
"Prince Alwaleed began buying Citi shares as he strongly believes that they are dramatically undervalued," according to an emailed statement from his office. His holdings are currently less than 4%, according to the statement.
