Posts for Ticker ‘Citigroup’

Citigroup, The Baby & The Bathwater (C)

Citigroup (NYSE: C) has come out with its highly awaited earnings.  The numbers and comments are all slightly different than prior media reports indicated, and some are not quite as aggressive as we expected.

  • The company’s net loss headline numbers is a loss of $9.83 Billion, or -1.99 per share (compared to -$1.00-ish consensus estimate from First Call). Results include $18.1 billion in pre-tax write-downs and credit costs on sub-prime related direct exposures in fixed income markets, and a $4.1 billion increase in credit costs in U.S. consumer primarily related to higher current and estimated losses on consumer loans.
  • Citigroup is raising $14.5 Billion, $12.5 Billion of which is via a private placement of convertible preferred securities and $2 Billion in a public sale of convertible preferred securities.
  • The $0.54 dividend is being cut down to $0.32, which isn’t as bad as the 50% guestimate that was going around yesterday.
  • It is continuing its divestiture of what will be deemed non-core assets. Its costs included 4,200 layoffs.
  • After the divestitures, Citi’s Tier One capital ratio would be approximately 8.2% and its TCE/RWMA capital ratio would be approximately 6.6%.  These are exceeding its previously announced targets.

You can go through the full releases if you choose, but these are tomes with explanations of each unit and in each global region.  If you want an opinion here, this looks, feels, and sounds like it is probably the first stage of a complete and full business review that doesn’t sound entirely complete.  It appears that the initial reaction to the numbers put shares up over 1%, but we caution that with more than 2 and a half hours to the open that these numbers are preliminary pre-market trades and might be grossly different than the trading by the time the market opens.

Jon C. Ogg
January 15, 2008

Posted on: January 15, 2008 – 7:00 am in Banking, Earnings, Financial Stocks, ,

Open Letter to Citigroup Board of Directors

Dear Board of Directors at Citigroup,

24/7 Wall St. has made no secret since early December 2006 that Chuck Prince needs to go.  Mr. Prince is not incompetent and he is not a crook, at least not at all from what we have been told by industry insiders and outsiders alike.  He was the right man for the time when Sandy Weil’s regulatory mess had to be cleaned up.

But we have read and heard from numerous sources that you are considering Bob Rubin as the possible replacement if Chuck Prince is truly resigning Sunday.  We strongly urge caution against this placement as anything other than interim.  Rubin might be an incredible interim Chairman, but he cannot be considered a permanent fix.  The chances are great that he may end up being dragged into being another financial advisor to the President-elect starting in 2009 and this could leave Citigroup somewhat vulnerable if Rubin is named as the full replacement.

We at 24/7 Wall St. take no joy nor do we take credit for any victory laps over a fired CEO.  Chuck Prince was the perfect man for an interim job at the time, even though we at 24/7 Wall St. said he had to go last year.  Do not make the same mistake by appointing Rubin as supreme commander, and if you do please do not make it anything more than "interim" for posterity purposes.

The officers of 24/7 Wall St. do not own securities in Citigroup.  But Citi is a DJIA component and we do want to see the integrity lost in the company as it such a powerful mechanism.

Wall Street at this point is willing to tolerate a "throw in the towel and throw in the kitchen sink" report along with Mr. Prince’s ouster.  Once again, we mean no disrespect to Mr. Prince nor to Mr. Rubin.  They were appropriate for a time but the best case scenario is for Citigroup to promote either from within or to hire the best gun in town to be sheriff.  You have the budget and this is your opportunity to shine.  At this point you do NOT have to commit to anything permanent, not yet anyhow.

Please don’t make the same mistake thrice.  Your shareholders will greatly appreciate it and benefit from it.

Jon C. Ogg & Douglas A. McIntyre   
24/7 Wall St.

Posted on: November 3, 2007 – 6:46 pm in Management Change, , , , ,

Citi Woes Continue….Thanks To Mr. Prince (C, JPM)

Citigroup (NYSE:C) shares have spent most of the day in the tank after three straight down-days in the stock.  In fact, todays intraday lows were actually 52-week lows. 

Conversely, JPMorgan Chase (NYSE:JPM) is seeing its shares trading up over 3%.  24/7 Wall St. has the take that the earnings were so-so, but based upon what we felt was Wall Street expecting bad numbers this is a net win compared to other banks.  The higher credit standards of Chase must be at least giving some insulation against the other half of the economy that isn’t doing as well.

But back to Citigroup…. There were rumors that Chairman & CEO Chuck Prince was finally about to step down.  The company told CNBC’s Charlie Gasparino that this rumor is baseless and that Mr. Prince has the full confidence of Bob Rubin and the Board of Directors.  If this could be compared to a baseball analogy then you’d determine that Chuck Prince is just about to go.  In baseball a losing manager gets a formal vote of confidence from the team owners and general manager.  And he’s then fired within two to four weeks.

Will he or won’t he?  That is the million dollar question.  Actually it’s a BILLION dollar question.  Citigroup has more than a $220 Billion market cap, and we have seen estimates that a Chuck Price resignation or firing could be worth an INSTANT 4% or 5% to shares.  That may be too much for one single person, but that is what some believe. 

Chuck Prince was a great fit at a critical time when the financial giant was having severe regulatory issues.  But that time has come and gone.  Citi no longer needs a regulatory fixer.  It needs a growth manager.  We have called for him to leave since late in 2006 and the stock is now worse than dead money.  If Mr. Prince really wants to make a lot of money on top of his options and pay, he should leverage his assets and buy all the stock he can and then "resign due to outside pressure."  He’d have a great payday on that.

Jon C. Ogg
October 17, 2007

Posted on: October 17, 2007 – 10:37 am in Banking, Management Change, , , ,

Citigroup’s Last Downgrade Before Earnings (C)

Citigroup (NYSE:C) is feeling the wrath of yet another SELL rating, this time the downgrade came from Deutsche Bank.  Interestingly enough, the note directly challenges management saying changes are needed in the chairman position and dissatisfaction with management.  The shakeup putting Vikram Pandit over trading, investment banking and alternative investments may appear to be desperation or a last ditch effort.

Shares are down 1.5% at $47.58, at the lower-end of the $44.66 to $57.00 range over the last 52-weeks.  But there is another thought to consider.  This is the last business day ahead of earnings.  Citigroup ramped up its earnings date.  You could argue that this will allow it to be the first of the big banks to report so that the bank has no comparables at all from peers.  Citigroup already threw out all but the kitchen sink with its previously lowered guidance of a 60% profit plunge.  It’s already going to be ugly, but now the question is for how much longer. 

Last week it was cut to Sell at Punk Ziegel, and Lehman maintained an overweight rating but cut its target to $59 from $60 at the time.   UBS earlier this week maintained its own Neutral rating on the banking giant.  24/7 Wall St. has been quite vocal about Chuck Prince needing to go, and he made the hall of shame last year when we discussed Chuck Prince needing to be fired then.  There is even a CNBC interview I gave with more gruesome commentary on this topic.  But today we’ve also got Chuck Prince’s defense as to why the board can’t turn on him too much.  No one else has done much better lately. 

Citigroup shares have been dead money since 2000.  Dear Chuck Prince, "It’s time to go.  You served your purpose in cleaning up operations.  But now a racehorse is needed.  And why on earth are you paying Bob Rubin so much?"

Jon C. Ogg
October 12, 2007

Jon Ogg produces the 24/7 Wall St. Special Situation Investing Newsletter; he does not own securities in the companies he covers.

Posted on: October 12, 2007 – 11:25 am in Analyst Calls, Banking, ,