Citigroup announces more writedowns, I'd stay away

Posted Jun 19th 2008 5:47PM by Melly Alazraki
Filed under: Forecasts, Bad News, Citigroup Inc. (C), Goldman Sachs Group (GS), Amer Intl Group (AIG), Lehman Br Holdings (LEH)

And you thought it was all over. Well, you weren't alone. Many bank executives thought the same thing, that we've seen the worst of the writedowns banks were taking as a result of the subprime mortgage collapse.

So when today Citigroup Inc. (NYSE: C), the bank responsible for 10% of the total writedowns due to the subprime and credit crisis, announced it "would suffer more "substantial" write-downs on debt investments in the second quarter," many were taken aback. Sure, the CFO said that sequentially, Citi would write down less than in the first quarter, but he also said the marks are "sizable" and gave the impression they will likely go into the next few quarters. Credit markets remain tight, he said.

Perhaps we've seen the worst, if I insist on being optimistic, but we surely haven't seen the last. Just in the past week we heard from Lehman (NYSE: LEH), AIG (NYSE: AIG), UBS (NYSE: UBS) and Fifth Third (NASDAQ: FITB). We heard of writedowns, asset sales and capital raises, none of which gave much confidence about financials and the credit markets, but there was the lingering hope we were seeing the last few hiccups (large as they were).

Still, people remained cautious and I didn't hear pounding the table to get into bank stocks, although no one could deny that some financials saw some recovery since mid-March. It was also somewhat puzzling that Citi managed to raise just over a month ago some $4.5 billion from its public offering. Meaning, there were buyers at $25 and change. The stock closed at $20.17 today after dipping to $19.41 earlier in the session.

OK, so I know we're supposed to be forward looking when investing, but there are some stocks in some sectors I simply wouldn't touch. Not all of them, of course. I'd much rather take my chances with Goldman (NYSE: GS).

Tags: aig, c, fitb, gs, inthenews, leh, ubs

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Reader Comments (Page 1 of 1)

6-19-2008 @ 6:21PM

Kent said...

Citigroup by banking standards is flashier and more market oriented than the other banks from my experience. It might explain some of the reasons they got into this sub-prime rate mess. I remember one time our company wanted to negotiate an international loan and after explaining the details we were asked if we might be interested in hooking into their software for foreign exchange information which wasn't the answer we wanted. We went to another bank. I believe they have a scatter-brain culture from way back thinking up all sorts of unworkable promotions. They are analogous to an automobile dealership of banking looking for immediate and high-returns rather than looking after customer needs.

6-20-2008 @ 1:30AM

B. Harrison said...

The BIGGEST FRAUD of all is the ongoing claims taht the "financial world was 'surprised' by what has happened". That is almost an "oxymorn" . . . the "financial world" is "the sophisticated professional EXPERTS", they darn well KNEW what was occurring. Because of their initial GREED, they just let themselves get sucked into all of that too deeply. They KNEW that all of that was financially unsound; but they irresponsibly got in too deep early on; and rather than bailing out of the problems, they hung in there, hoping for some miracle (that never occurred.) There is NOT ONE of the CEOs, CFOs, or uppermanagement in those corporations who did not KNOW what was going on. They ALL should be prosecuted for CRIMINAL FRAUD.

The CEO, CFO, and upper managment at CITI Bank certainly have known the extent of the problems; and they have obviously tried to hide the full extent of the losses< which should exacerbate their liabilities and responsibiilities for PREMEDITATED FRAUD.

It's time to put these "white collar CROOKS" in prison for a LONG TIME.