Citigroup (NYSE: C) may need more cash. The head of Dubai International Capital told Reuters that it would take "a lot more money" to rescue Citigroup following investments from Abu Dhabi, Kuwait and Saudi Arabia's Prince Alwaleed.
The statement has the benefit of probably being true. Citi is almost certainly faced with more subprime losses and its derivative holdings of credit cards and munis plus LBO paper could lead the bank to have to write-off billions more in losses from these.
The question is where will the big bank go. Sovereign funds may not have an appetite for putting up more capital. US private equity firms may find the deal too risky. Things may get bad enough that the Fed will have to step in and give Citi a huge loan to keep its balance sheet solid enough for the bank to remain solvent.
The "a lot more money" may come from taxpayers.
Douglas A. McIntyre is an editor at 247wallst.com
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Reader Comments (Page 1 of 1)
3-04-2008 @ 9:11AM
alan said...
No doubt the worst is yet to come. Only 1/3 of the CDO and SIV mess has been accounted for. That leaves 2/3 more that is probalby as crappy as what has been written off/down so far.
In addition, there are growing deliquencies in other asset categories, ie. credit cards, installment loans, construction loans, etc. Add to this a slow down in economic activity that translates to less bank businessin general and Citi is in DEEP KAKA.
Pandit has been hiding under his desk along with the Board and this clear lack of leadership is a CRIME. What a dumd mistake.
I know many shareholders are optimistic, but optimisim in the face of stark reality is not the best course of action. Hold on to those shares folks as Citi rides the elevator down to $18 - $20 once the 1Q results are out.