Expect Sell-Off in Global Equity Market Next Week!!!
The financial giant, considered a symbol of globalisation, the Citigroup which is headed by Indian American Vikram Pandit is going to get merged with some other financial institution or will file bankruptcy over the weekend. The firm’s stock tumbled 20% lower at $3.77 on friday when DOW was up 6%, as investors awaited the outcome of a meeting of board members which will continue over the weekend.
Before the market opens on Monday…..
Citigroup’s executives are not expected to sleep much this weekend as they continue to pursue contingency plans, including what they might need to calm anxious investors before the stock market opens on Monday morning.
Morgan Stanley and Goldman Sachs Inc as a potential suitor for Citi (JP Morgan will not bid)…
Citigroup’s stock has reached a level that may force government action. Citigroup executives also are weighing the possibility of selling the company or merging with a rival. Some analysts have pointed to Morgan Stanley and Goldman Sachs Inc as a potential suitor.What investors are worried about is that all the risky debt sitting on Citigroup’s balance sheet will eventually turn into losses as the economy worsens and the markets stay turbulent – losses that could be nearly impossible to reverse.
Shares closed at $3.77 on friday, down 60% in a week…
US banking giant Citigroup, Citigroup, is rumoured to be in merger talks with after its shares plunged 26% yesterday amid fears about its financial viability. Shares in the bank were trading at $54 two years ago, however, the shares closed yesterday at $3.77.
The bank, which is one of the largest banks in the US, announced plans to slash 52,000 jobs earlier this week, as it aims to cut costs due to enormous losses which arose from the US sub-prime mortgage crisis and the credit crunch.
The Wall Street Journal has reported that Citigroup is considering to sell parts of the bank or even the whole business. There is speculation that it is considering merging with another bank.
Yesterday, Saudi Prince Al-Waleed Bin Talal’s purchased around $350 million (£236 million) worth of shares, however, this did not allay investors’ fears.
Citigroup has $2 trillion assets across globe, distress sale will start…..
Some analysts believe the bank will not make a profit again until 2010 after it has lost over $20 billion (£13.6 billion) in the last 12 months alone. The bank is one of nine institutions receiving financial aid from the US Government’s bailout package.
$25bn loan from FED is more than Mcap of Citi which is $20.5bn – Bankruptcy!!!
Citigroup shares tumbled a fifth straight day as CEO Vikram Pandit tried to downplay speculation that the banking giant might sell major businesses to restore its health and investor confidence. The company’s market value fell to $20.5 billion on Friday, which is less than the $25 billion taxpayer-funded injection it received from the federal government, and a source familiar with the matter said the bank was mulling options including a merger or a sale of parts of the company.
Citi faces a crisis of confidence as investors question the bank’s survival prospects. The company has been reeling on concerns that mounting losses from credit cards, mortgages and toxic debt could overwhelm its efforts to slash costs and increase deposits.
Indian market will be impacted in big way, but there is always an opportunity behind any crisis, we will post what are those opportunities!!!
– JK, Associate, HBJ Capital