Goldman Slaps Citi With a ‘Sell’

Goldman Sachs downgraded Citigroup Monday to Sell from Neutral, saying the bank may have to book $15 billion in CDO [collateralized debt obligation] writedowns over the next two quarters, related to its $43 billion exposure. Citigroup has already said it expects an $8-11 billion loss. Goldman analyst William Tanona said that Citi's problems are likely to spread to its consumer business, such as credit cards and retail banking. "The lack of leadership at this point in Citi's storied history could not have come at a worse time. With deteriorating consumer and housing metrics, Citigroup is facing mounting pressure across many businesses," Tanona said. After Chuck Prince left the company, Citi's Chairman of European operations, Sir Win Bischoff, was appointed interim CEO (full story). "We do not expect there will be a 'quick fix' to some of Citigroup's issues and it will likely take the new CEO some time before he/she decides on the appropriate course of action to take," he wrote. The report also discussed Citi's weakened financial strength. The bank may have to lower its dividend, sell stock, or divest assets to raise money. "Citigroup is trading at a 10-year low price to book multiple of 1.3 times. While this has traditionally been a time we would get much more positive, the firm is facing a number of major issues that precludes us from taking that step, and rather, we are getting increasingly uncomfortable with its near-term prospects." Citigroup was down 4.5% to $32.47 in midday trading Monday.

Sources: MarketWatch, Reuters
Commentary: Did Anyone Other Than Citigroup Have Liquidity Puts? • Greatest Valuation Changes Since 10/9 Peak
Stocks to watch: C, GS. Competitors: MER, DB, LEH. ETFs: IAI, XLF
Earnings call transcript: Citigroup Q3 2007

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Comments

[Frank Li]

I guess after Citi's "Sell" rating on E*Trade, what goes around comes around...