The Thailand expat forum for Travel, Lifestyle and Fun.

bkkandrew

Maybe City's bounce a bit premature:

http://www.bloomberg.com/apps/news?pid=20601103&sid=aElaUvS1sxzw&refer=news

Citigroup May Need to Sell Assets to Bolster Capital (Update1)

By Bradley Keoun

April 19 (Bloomberg) -- Citigroup Inc. shareholders, cheered by a $5.1 billion first-quarter loss that wasn't as big as some analysts forecast, face growing concern that the bank may have to sell assets, reduce the dividend and attract outside investment to bolster capital.

Citigroup's so-called Tier 1 capital ratio -- a measure of its ability to withstand loan losses -- fell to 7.7 percent at the end of March, the New York-based bank said yesterday. Citigroup says it needs a 7.5 percent ratio to provide a margin of safety and preserve its credit ratings.

The bank's shares surged 4.5 percent yesterday after it reported $16 billion of asset writedowns during the quarter, less than some observers predicted. The writedowns burned through much of the $30 billion of capital Citigroup has raised since late last year, leaving it vulnerable to further charges and loan-loss provisions.

``We're in a recession, they have a huge consumer book, and there's huge double-digit-billion provisions that they're going to have to take in the next 18 months to two years,'' CreditSights Inc. analyst David Hendler said. ``They're undercapitalized for their risk.''

A weakening U.S. economy and rising consumer delinquencies have forced Chief Executive Officer Vikram Pandit and Chief Financial Officer Gary Crittenden to back away from assurances earlier this year that the bank didn't need to raise more capital. In January, Crittenden said Citigroup ``stress-tested'' its assumptions under ``multiple recessionary scenarios.''

`No Silver Bullets'

Asked yesterday if the bank might seek an additional infusion, Crittenden said, ``You can never say never.''

``This is a difficult business environment,'' Crittenden said on a conference call with analysts and investors. ``There are no easy solutions here, no silver bullets.''

Citigroup raised capital in December and January by selling stakes to investment funds controlled by foreign governments including Abu Dhabi, Korea and Kuwait. The infusion helped boost Citigroup's Tier 1 ratio to 8.8 percent by Jan. 22 from 7.1 percent at the end of the year.

The first-quarter loss was second in size in the bank's 196-year history only to the record $9.88 billion reported in the previous period. It wiped out so much capital that Citigroup may have to find outside investors or cut the dividend, Hendler said.

Citigroup in January slashed its dividend by 41 percent, the first reduction since the early 1990s.

Downgrades

Standard & Poor's said it is reviewing Citigroup's rating for a possible downgrade, noting that earnings may be further depressed by loss reserves on the bank's loan portfolio. Fitch Ratings lowered the company's rating one level to AA- from AA, with a negative outlook. Fitch cited deteriorating earnings in the consumer business and investment bank losses.

Pandit, who took over in December, inherited the subprime mortgages and bonds now being written down from his predecessor, Charles O. ``Chuck'' Prince.

Yesterday Pandit said he's selling assets and shedding units outside the retail banking, trading, investment-banking and transaction-processing businesses. He's cutting about 9,000 jobs over the next year, on top of 4,200 announced in January.

Cont...

__________________
Another escapee from the mad muppets of TV...



To view links or images in signatures your post count must be 10 or greater. You currently have 0 posts.

bkkandrew

People in UK keeping their saving under the matress triples to 11%

http://news.bbc.co.uk/2/hi/business/7367745.stm

Trust rises in 'mattress saving'



The number of people who think the best place for their savings is "under the mattress" has risen, a survey by Newcastle Building Society suggests.

About 11% of those surveyed thought their home was the best place for their savings, up from 4% a year earlier.

Since the Northern Rock crisis and broader credit crunch, consumers are more wary about investing in banks and building societies, the survey said.

Newcastle Building Society said the survey was a "stark sign of the times".

"With some attractive savings products available, you might think people are barmy to stash their cash at home," said Wendy Lee commercial director of Newcastle Building Society.

"Unfortunately, some savers now have an exaggerated view that investing their money with a building society or bank can be a risky business, which is not the case."

Under the Financial Services Compensation Scheme, savers get back the first £35,000 of their money should their bank or building society go out of business.

Only 57% believed the safest place for their money was in a bank or building society, compared to 74% a year earlier.

bkkandrew

Now is Halifax, Bank of Scotland that have admitted running out of dosh...

http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article3822669.ece

HBOS board to consider rights issue


THE board of HBOS will meet tomorrow to decide whether to approve a multi-billion-pound rights issue to repair the bank’s balance sheet.

Lord Stevenson of Coddenham, chairman of the group that includes Halifax, Bank of Scotland, Clerical Medical and Birmingham Midshires, has called the discussions ahead of the bank’s annual shareholder meeting on Tuesday in Glasgow.

The board is being asked to consider raising between £2 billion and £4 billion from investors. It is still possible that the group, which has a market value of £18 billion, could attempt to ride out the credit crisis without raising additional funds.

HBOS has had one of the strongest capital ratios – a measure of a bank’s strength – in the sector. It is still stronger than Royal Bank of Scotland and Barclays, but its ratio remains much below its long-term average.

Andy Hornby, the HBOS chief executive, has also been down-beat about the immediate prospects of the UK economy.

As a result he may want to raise capital to have headroom should the outlook deteriorate. The move follows Royal Bank of Scotland’s £12 billion rights issue announced last week. One analyst said: “RBS was forced to raise money after a mistimed acquisition. With HBOS it’s more about what Hornby thinks about the economy.”

At the annual meeting Hornby is expected to admit the bank has taken a further writedown of up to £3 billion on assets whose value have been eroded by the credit crunch.

Cont...

Texpat

Ended the week at 12,892. Going the wrong direction, eh Butterfly?

And to think I redeemed all my shares based on your prediction.

raycarey

IMO you'd have to be crazy to buy into this rally.

bkkandrew

^Agreed. Ask Joe Lewis...

Butterfly

I hope you are joking, but basing your investment timing on the DOW is not very smart. First you have to understand that thee DOW30 is one of the worst index out there, it's very biased, that's why it never seems to go down, they remove losers from the Index and replace them with momentum stocks. I am sure if we had to go back 4 years and keep the same stocks in the DOW, the index would be around 8,000 now, not 12,000

For your information, NASDAQ index is still 50% down from 2000, and hasn't recovered yet, even after nearly 10 years. It will probably take 15 years to recover now.

raycarey

you should charge texpat for this sort of tutelage.

Texpat

I'm not the one who suggested the DOW would bottom at 6K.

And thanks, but no thanks, if I require investment advice, I'll get it from professionals, not TD members.

Butterfly

I doubt it would make any good use of any of it or even understand the ramifications of it, he is better off being ripped off by his local brokers,

Butterfly

hahaha, unfortunately "professionals" at your level would probably be a "sell-side" player, and that means you and your money being the product, not your investment objectives

Texpat

I've alrady made my position on this collapse clear. It'll be a blip in 10 years, just like Black Friday was, just like the S&L crisis was, just like the 9-11 crash was. If you react to every short-term market adjustment, your broker will be a happy man (woman).

Also note I said if I required advice. I haven't in several years. I've never talked to a financial advisor who thought my portfolio was balanced for my needs. They always suggest selling something to buy another -- wonder why?

Boon Mee

bkkandrew

How many more times can the shares be diluted until there is simply nothing left?

http://www.bloomberg.com/apps/news?pid=20601087&sid=aJIhs9sMeEQg&refer=home

Citigroup May Fall on Plan for $3 Billion Share Sale (Update1)

By Bradley Keoun



April 30 (Bloomberg) -- Citigroup Inc., the biggest U.S. bank by assets, may fall in New York trading after offering $3 billion of stock to increase capital depleted by writedowns on subprime-related mortgages and bonds.

The shares will be sold in a public offering, New York-based Citigroup said in a statement.

Citigroup fell about 3.8 percent to $25.32 in extended trading yesterday after the stock sale was announced. It has declined 11 percent this year.

``We were hoping they wouldn't have to go the equity markets like this,'' said William Fitzpatrick, an analyst at Optique Capital Management in Racine, Wisconsin, which held more than 550,000 Citigroup shares at the end of last year.

``This was extremely disappointing.'' (My edit - you don't say!)

Citigroup already has raised more than $30 billion of capital since December, including the sale of equity to investment funds controlled by foreign governments in Abu Dhabi, Singapore and Kuwait. The company sold $6 billion of preferred shares, a bond-like security that isn't dilutive to common shareholders, last week after it reported a $5.1 billion first- quarter loss and cut 9,000 jobs.

Oppenheimer & Co.'s Meredith Whitney, who was one of the first analysts last year to predict the extent of Citigroup's losses, said the latest stock offering won't protect the company's finances against future losses.

``The fact that the company raised such a small amount of capital at this time confounds us,'' Whitney wrote. ``We believe Citi needs to raise an additional $10-$15 billion or sell several hundreds of billions worth of assets in order to truly shore up its capital position.''

Tier 1

The new equity, when combined with $6 billion of preferred stock, will raise Citigroup's so-called Tier 1 capital ratio to about 8.5 percent, the company said in yesterday's statement. The ratio, used to gauge a bank's ability to withstand loan losses, was 7.7 percent at the end of March. Regulators consider banks with a Tier 1 ratio of 6 percent ``well capitalized.''

Citigroup sets its Tier 1 target at 7.5 percent, to give itself a margin of error and help avoid a downgrade of debt ratings. When the company reported its first-quarter loss, Standard & Poor's said it was reviewing the bank's credit rating, currently AA-, for a possible downgrade. Rising consumer-loan delinquencies may force the bank to set aside higher reserves to cover bad debt, Standard & Poor's said.

`Capital Structure'

``We continue to optimize our capital structure,'' Chief Financial Officer Gary Crittenden said in yesterday's statement.

JPMorgan Chase & Co., the third-biggest U.S. bank by assets, and Merrill Lynch & Co., the third-largest securities firm, also have raised capital in recent weeks by selling preferred shares.

Chief Executive Officer Vikram Pandit and Crittenden said earlier this year that Citigroup might avoid the need to raise more capital. Crittenden said in January that the company had ``stress-tested'' assumptions under ``multiple recessionary scenarios.'' Then the bank posted its first-quarter loss and Crittenden was asked on an April 18 conference call with analysts if the bank might seek more capital. He said, ``You can never say never.''

Pandit said at the company's annual meeting last week in New York that ``2008 remains a challenging time for financial markets and, in general, for our entire industry.''

Citigroup has had more than $40 billion of credit losses and writedowns since the subprime mortgage market collapsed last year. The world's biggest banks have raised more than $170 billion in capital to replenish their coffers.

bkkandrew

...Less than a month after they threatened to sue all of Fleet Street and said that they were 'One of the Strongest Financial Institutions in the World"

(I didn't believe it then and I don't now, but some have joined my opinion...)

http://www.guardian.co.uk/business/2008/apr/29/hbosbusiness.creditcrunch

HBOS drifts into perilous waters

This article appeared in the Guardian on Tuesday April 29 2008 on p25 of the Financial section. It was last updated at 00:04 on April 29 2008.

Have another look at HBOS's results for 2007, announced only two months ago.

Andy Hornby, the chief executive, described the balance sheet as "strong". The same adjective was applied to the flow of wholesale funding to the group. This, we were told, would provide "the necessary flexibility to operate in these challenging markets". As for write-downs, there was little to report - just £227m of fair-value adjustments that were "expected to reverse over time". The breezy confidence was expressed in the 18% increase in the dividend.

That is hard to square with what is expected to arrive today: £3bn of asset write-downs and a rights issue to raise £4bn. If HBOS shies away from the cash call at the eleventh hour, it is likely instead to signal disposals of non-banking businesses.

Either way, it is quite a turnaround. The write-downs should be deeply embarrassing. HBOS has minimal operations in the US yet, at last count, had £7bn of Alt-A mortgages, which are not sub-prime but are below investment grade, and £6.6bn of collateralised debt obligations. Exposures of that size require an explanation. The bank, in its hunt for ready pools of capital, seems to have travelled a long way from safety.

Hornby's critics, who say he is more a marketing man than a banker, will not be impressed. HBOS, it seems, was sucked into an arena it didn't understand.

Texpat

US Economy grew in 08Q1.

Not spectacular. Barely even modest.

But it grew.

chinthee

^Actually, it has grown for the past two quarters (ok, barely), but under the classic definition of a recession, it is not in a recession...yet.

bkkandrew