15 January, 2008

Citigroup Loses It's Hat in Latest Quarter

Citigroup (C) started a new trading day for Wall Street with what traders had feared for months now. Enormous credit losses. For the bank, it was the biggest loss in its 196 year history as a company. Almost $10Billion to be exact. Catastrophic? I think so.

With about $18Billion in write-downs to assets related to mortgage and credit, Citigroup was plagued by its "both-feet" in approach to the sub-prime market which has over the course of the last 6 months completely collapsed under its own weight; scratch that, greed. Citi lost $1.99/share compared to the expected $1.03/share but even some traders expected worse, so they asked questions about further losses. Citigroup has been by far hit the hardest of the major US banks and by and large it has deserved every licking. The icing on the cake in this quarter was the recently foreshadowed risk of dividend cuts. Citi in fact, cut its dividend by 40%. Four-Zero Percent!

Management tried its best to tap dance around the "unacceptable" and staggering loss metrics but the dividend cut was the stocks undoing today. The company prays that Investors hope that now the worst is surely over. It might just be, but it will take a long while for Citi to right the ship again. The dividend cut was the last straw for many Investors and Citi's stock fell over 7% in regular trading and stands down another 1% in extended hours.

Citi's problems plagued the entire market today as all major Indices were heavy to the negative side. The whispers of the credit crisis spilling over into spending, whispers of dividend cuts, whispers of massive losses, all turned into yells, and it seems no one was screaming louder than those saying "Sell Citigroup".

Can newly minted CEO Vikram Pandit give life and convince investors of new found confidence in the major Financial Institution that is Citigroup? That's the big question Investors are asking themselves and until the stock shows some life, they're probably looking for their own hats and the door.

Disclosure: Author owns C

1 comment:

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