Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Trump Stocks and Crypto Mania 2025 Incoming as Bitcoin Breaks Above $100k - 8th Dec 24
Gold Price Multiple Confirmations - Are You Ready? - 8th Dec 24
Gold Price Monster Upleg Lives - 8th Dec 24
Stock & Crypto Markets Going into December 2024 - 2nd Dec 24
US Presidential Election Year Stock Market Seasonal Trend - 29th Nov 24
Who controls the past controls the future: who controls the present controls the past - 29th Nov 24
Gold After Trump Wins - 29th Nov 24
The AI Stocks, Housing, Inflation and Bitcoin Crypto Mega-trends - 27th Nov 24
Gold Price Ahead of the Thanksgiving Weekend - 27th Nov 24
Bitcoin Gravy Train Trend Forecast to June 2025 - 24th Nov 24
Stocks, Bitcoin and Crypto Markets Breaking Bad on Donald Trump Pump - 21st Nov 24
Gold Price To Re-Test $2,700 - 21st Nov 24
Stock Market Sentiment Speaks: This Is My Strong Warning To You - 21st Nov 24
Financial Crisis 2025 - This is Going to Shock People! - 21st Nov 24
Dubai Deluge - AI Tech Stocks Earnings Correction Opportunities - 18th Nov 24
Why President Trump Has NO Real Power - Deep State Military Industrial Complex - 8th Nov 24
Social Grant Increases and Serge Belamant Amid South Africa's New Political Landscape - 8th Nov 24
Is Forex Worth It? - 8th Nov 24
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Citigroup Breakup Speculation Sends Credit Default Risk Soaring

Interest-Rates / Corporate Bonds Nov 21, 2008 - 01:38 PM GMT

By: Mike_Shedlock

Interest-Rates

Best Financial Markets Analysis ArticleI have been saying for over a year that Citigroup would not survive in one piece. That option is looking increasingly likely as the Citigroup Board Weigh Options .

Citigroup Inc.'s board meets today to discuss the bank's options after Chief Executive Officer Vikram Pandit's efforts to rebuild investor confidence failed to halt the stock's descent to a 15-year low, a person with knowledge of the matter said.


The board, led by Chairman Win Bischoff and independent director Richard Parsons, will meet at Citigroup's headquarters in New York, said the person, who declined to be identified because the deliberations are private. The panel may choose to sell pieces of the bank or the entire company, the Wall Street Journal reported, citing unidentified people familiar with the situation. The New York Times reported that management isn't actively considering a sale or split up of the bank.

Citigroup, once the biggest U.S. bank, with a stock market value of $274 billion at the end of 2006, dropped yesterday to about $26 billion, slipping to No. 5 after Minneapolis-based U.S. Bancorp.

"Investors right now aren't convinced that we're done seeing dead bodies on the Citigroup balance sheet," said William Fitzpatrick, an equity analyst at Optique Capital Management Inc. in Milwaukee, which oversees about $1 billion and doesn't own Citigroup shares. "That's what the sell-off is, concern over more and more losses over the next couple of quarters."

Balance Sheet Blues

Concern over its balance sheet is indeed one of the issues. Credibility of Citigroup management is another issue. I discussed both yesterday in Citigroup Blames Short Sellers For Collapse and previously in Citigroup's Town Hall Meeting .

Credit Risk Rises On Breakup Speculation

Bloomberg is reporting Credit Risk Rises on Citigroup Breakup Speculation

The cost of protecting bonds sold by Wall Street banks from default rose amid speculation Citigroup Inc.'s board may consider a breakup of the company when directors meet later today.

Credit-default swaps on New York-based Citigroup jumped to a record on concern a break-up could leave debt holders with a weakened company. Contracts on other U.S. banks including Wells Fargo & Co. and Goldman Sachs Group Inc. also rose.

Citigroup directors, led by Chairman Win Bischoff, will discuss the bank's options after shares in what was once the biggest U.S. bank tumbled to a 15-year low, a person with knowledge of the matter said. The panel may choose to sell pieces of the bank or the entire company, the Wall Street Journal reported, citing unidentified people familiar with the situation.

Such scenarios imply that brokerage units Citigroup Global Markets and Smith Barney “would be peeled away from the banks,” said Ricardo Kleinbaum, a credit analyst at BNP Paribas in New York. That could be triggering concerns that credit-default swaps would be left tied to a weakened entity, he said.

Credit-default swaps on New York-based Citigroup climbed 65 basis points to 465 basis points, according to CMA Datavision. The contracts on Citigroup, which analysts forecast may report its fifth-straight quarterly loss in January, has surged from 10 basis points since the start of the credit crisis last year. A basis point on a credit-default swap contract protecting $10 million of debt from default for five years is equivalent to $1,000 a year.

Citigroup To Offer Japan's Nikko Workers Early Retirement

In related news Citigroup Said to Offer Japan's Nikko Workers Early Retirement

Citigroup Inc., which this week said it's shedding 52,000 jobs, is seeking to reduce its workforce at its Japanese brokerage unit by offering earlier retirement to some employees, two people familiar with the situation said.

Nikko Cordial Securities Inc., which employs about 7,000 in Japan, made the proposal to employees over the age of 40 in a memo from President Eiji Watanabe yesterday, the people said, declining to be identified because a public announcement hasn't been made. The offer also includes about two years of pay, the people said.

"Some talented employees may leave the firm, yet people who underperformed may stick to the company as the job market is extremely tight now,'' said Makoto Haga, president of Wing Asset Management Co., a Tokyo-based hedge fund. "Citigroup cannot avoid a massive redundancy here in Japan as the global financial market is worsening further."

Citigroup Shares Hammered Again

Citigroup is down another 17% percent today after dropping 26% yesterday and 21% the day before. The new 52 week low is $3.57. Citigroup last traded at these prices in 1993.

Repeating what I said yesterday, "the market seems to believe Citigroup is insolvent and so do I". It remains to be seen if Citigroup does decide to break up and if so at what price for each piece, or if another bank can take them over completely.

By Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Click Here To Scroll Thru My Recent Post List

Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management . Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.

Visit Sitka Pacific's Account Management Page to learn more about wealth management and capital preservation strategies of Sitka Pacific.

I do weekly podcasts every Thursday on HoweStreet and a brief 7 minute segment on Saturday on CKNW AM 980 in Vancouver.

When not writing about stocks or the economy I spends a great deal of time on photography and in the garden. I have over 80 magazine and book cover credits. Some of my Wisconsin and gardening images can be seen at MichaelShedlock.com .

© 2008 Mike Shedlock, All Rights Reserved

Mike Shedlock Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in