Citigroup's Flush 36 comments
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A plan seems to be emerging from Citigroup (C). If nothing else, the credit situation was not as bad as people feared.
Citigroup reported a net loss of $5.1 billion, or $1.02 a share, for Q1 with more than $10 billion of write-downs. Revenue fell 48% to $13.22 billion. They took $6 billion of pretax write-downs and credit costs on sub-prime loans. The firm also announced write-downs of $3.1 billion on funded and unfunded highly leveraged finance commitments, a downward credit value adjustment of $1.5 billion related to exposure to monoline insurers, write-downs of $1.5 billion on auction rate securities inventory, and a $3.1 billion increase in credit costs in its global consumer business.
Citi also said they have already sold $4 billion in leveraged loans in April. CFO Gary Crittendon said there will be no "transformational" assets sales (they will sell some, just nothing big) in 2008, no more dividend cuts, and no more equity raising. About 9,000 additional jobs, on top of the 4,000 already announced are going to be cut.
In short, things seem to have bottomed. This is not to say it is a shot up from here. My guess is things languish for a while until there is some trust back in the financials. The past month has seem an avalanche of bad news out there, and as a group the financials have taken the hit and equity prices have remained stable.
Now we look to next quarter for more stabilization and perhaps improvement. If there is improvement, it will be small. Just no further billion-dollar write-down would be huge at this point. Investors seem to have much more clarity as to both what is happening inside the bank and in the environment it operates in.
For long term folks, it would seem a good time to get in.
Disclosure: Author is long C.
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This article has 36 comments:
Never buy Stocks that are up 10% in a Day.-Jim Cramer
By the way, how come there is no criminal investigation of the Bear Stearns CEO??
This might help you understand Alt-A....Sacramento Style....
Let’s see the adjustable mortgages peak in FED MARCH and April of this year. That means the foreclosures should peak starting in July and just keep on growing as the REO properties are dumped on the market. OH and let’s remember the ALT-A mortgages and the Option ARMs that reset late this year. Yea boys the good news will keep on coming.
Keep in mind the CREs and the credit cards as the recession expands throughout the year.
How about the off the CITI books 300 billion in VIE Variable interest entities. Yea did you forget that those are worth 27 cents on the dollar? That means CITI has got about 100 billion in negative shareholder equity. So run right in there before all the shares are sold: SUCH A DEAL.
This whole Bank mess reminds me of the DOT COM BUST.
Maybe the banks woundn't lead us out of the bear market.
I say let some bad banks fail and thier your regulation.
the class action lawsuits connected to ARS (Auction Rate Securities).
This write down will be bigger than Enron related write downs.
Wait 'til all those stories parade thru courts
www.nothingcontroversi...
The same thing is happening in the stock research analysis. Most of the stock analysts, give positive analysis of companies, while actually it shouild be negative. This leads me to think that the analysts are in the pockets of the companies. They do not care that many people, who have invested in these stocks with their life savings, would go bust and be on the streets in their retirment age. They have no conscience, as their greed exceeds their moral commitments.
I have as much use for analysts "opinions" as I do used toilet paper. I flush both.
If bankers tell me they (1) cannot know from the published data and informartion what risks the banks really have and that (2) you can hide almost everything in a bank#s balance sheet I wonder how "investing" in a bank stock is different from rolling the dices or playing roulette? I mean, with a materials stock or an industrial company I can quite well asess their assets, liabilities, earnings risks. I can arrive at a fair valuation (fair to me, that is, other market players might differ) and accordingly set a buy level and manage my risk. With a bank ,though, mgmt can make earnings look almost any way they like them to be, hiding losses and liabilities for years and years. So they might only come out after one or two former CEOs have long retired and collected all their bonuses and cashed out their stock options. HOW do YOU KNOW(!) that Citi is in fact not worth, say, less than half of 25$/share?
Question: If banks just don't trust each other right here right now - why should WE??
only 2 weeks(!!) later: "Citi seeks to raise an extra $3bn in equity"
Yeah, and of course, this will be the last time of raising additional equity. Todd, how many times more do you want to allow yourself being screwed by these crooks?
Seems that Whitney has been once again right on the money. And she talked of at least another 10-12 billion that need to be raised (or else a couple hundred billion of assets sold)...