| Page 2 of 2 < |
Citi Works to Assure Investors
|
TOOLBOX
   Resize
COMMENT
 Discussion Policy
 CLOSE
Comments that include profanity or personal attacks or other inappropriate comments or material will be removed from the site. Additionally, entries that are unsigned or contain "signatures" by someone other than the actual author will be removed. Finally, we will take steps to block users who violate any of our posting standards, terms of use or privacy policies or any other policies governing this site. Please review the full rules governing commentaries and discussions. You are fully responsible for the content that you post.
Who's Blogging  |
Citigroup, however, is confronting its difficulties with the support of several new government programs specifically designed to help banks.
The Federal Deposit Insurance Corp. finalized a program yesterday that makes it easier for banks to borrow money from investors or other banks by guaranteeing that debt against loss. The Federal Reserve is lending unprecedented sums to banks that cannot raise money from investors. And the Treasury Department already has invested $25 billion in Citigroup and could decide to raise its stake.
Indeed, Citigroup now has about $50 billion in capital above the amount that regulators require the bank to hold against future losses. The bank has whittled down its holding of mortgage-related investments, and it has stayed on the sidelines while rivals Bank of America and J.P. Morgan Chase both bought large mortgage lenders, taking on huge numbers of loans that are likely to fail.
"It would take a depression every bit as large and long as the 1930s debacle to shake this company's viability," wrote Richard Bove, a banking analyst with Ladenburg Thalmann, in a research note to clients. "I would be a buyer of this stock."
But other analysts noted greater concern about the company's massive holdings of other kinds of consumer loans. Citigroup is one of the world's largest credit card lenders, and delinquency rates on credit-card loans are projected by banking analysts to reach record heights next year. The bank also is a leading lender to consumers in developing markets around the world, where economic struggles could outpace problems in the United States.
"They have a huge book of consumer loans and securities that nobody knows what they're worth," said Keith Davis, an analyst with Farr, Miler & Washington. "They're going to have to continue taking losses, and is there really enough (capital) to support that? The answer is probably no."
Citigroup issued a statement that said the company "has a very strong capital and liquidity position and a unique global franchise. We are focused on executing our strategy, including our targeted expense and legacy asset reductions, and we believe the benefits will be seen over time."
The company has placed ads affirming its health in a number of U.S. and international Sunday newspapers.
Staff writer David Cho contributed to this report.
