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prophet
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Posting #21: Thu Jan 3rd, 2008 08:56 |
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Citigroup May Write Down $12 Bln - Analyst
Thu Jan 3, 2008 1:03am EST Email | Print | Share| Reprints | Single Page | Recommend (-) [-] Text [+] NEW YORK (Reuters) - Citigroup Inc (C.N: Quote, Profile, Research), the largest U.S. bank, may need to write down $12 billion of debt and boost reserves for bad loans by $1 billion as the global credit crunch deepens, a Sanford C. Bernstein & Co analyst said.
Bank of America Corp (BAC.N: Quote, Profile, Research) and JPMorgan Chase & Co (JPM.N: Quote, Profile, Research), the second- and third-largest banks, may have respective fourth-quarter write-downs of $5.5 billion and $1 billion, analyst Howard Mason also wrote in a Dec. 31 report.
"We are trimming our estimates for the fourth quarter of 2007 and 2008 to account for capital markets write-downs, loan loss reserve building, slower net interest margin re-normalization in 2008 and reduced buyback activity," Mason wrote.
The analyst also halved his forecast for a fourth-quarter write-down at Wachovia Corp (WB.N: Quote, Profile, Research), the fourth-largest bank, to about $1.5 billion from $3 billion.
Financial companies have already announced more than $70 billion of write-downs tied to the global credit crisis.
Last week, Goldman Sachs & Co analyst William Tanona projected fourth-quarter write-downs of $18.7 billion at Citigroup and $3.4 billion at JPMorgan.
Mason now expects a fourth-quarter loss of 65 cents per share at Citigroup, and quarterly profit per share of 40 cents at Bank of America, $1.00 at JPMorgan and 30 cents at Wachovia. He had previously forecast a break-even quarter for Wachovia.
The analyst rates Citigroup and Wachovia "outperform," and Bank of America and JPMorgan "market perform."
Analysts on average expect a quarterly loss per share of 61 cents at Citigroup, and profit per share of 23 cents at Bank of America, $1.01 at JPMorgan and 36 cents at Wachovia, according to Reuters Estimates.
(Reporting by Jonathan Stempel; Editing by Maureen Bavdek)
© Reuters 2008 All rights reserved
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prophet
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Posting #22: Wed Jan 9th, 2008 00:42 |
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Citigroup to Take $16 Billion Writedown, Merrill Says (Update3)
By Edward Evans
Jan. 8 (Bloomberg) -- Citigroup Inc., the biggest U.S. bank, may be forced to write down $16 billion in the fourth quarter and post a larger loss than previously estimated, Merrill Lynch & Co. analyst Guy Moszkowski said.
Moszkowski almost doubled his estimate for Citigroup's loss to $1.43 a share, from 73 cents, in a note to clients today. Moszkowski, the top-rated U.S. bank analyst according to Institutional Investor magazine, maintained his ``neutral'' rating on the New York-based bank.
Sanford C. Bernstein & Co. and Goldman Sachs Group Inc. have also cut their estimates for Citigroup on concern the bank will mark down some of its $55 billion of subprime and collateralized debt obligation holdings. U.S. subprime-mortgage defaults have forced financial institutions to announce about $100 billion of asset writedowns and losses on bad loans.
Writedowns at Bear Stearns Cos. and Lehman Brothers Holdings Inc., whose fiscal year ends a month earlier than Citigroup in November, suggest ``substantial deterioration in the value of the underlying securities'' as well as the failure of some hedging strategies, Moszkowski wrote. ``Further, overall fixed-income trading results were abysmal at all most November year-end firms and likely worsened in December,'' he wrote.
Citigroup Chief Executive Officer Charles Prince stepped down two months ago after the bank said it may write down as much as $11 billion on top of more than $6 billion of charges reported for the third quarter.
Sanford Bernstein's Howard Mason said Citigroup may have to cut the value of holdings by $12 billion in the fourth quarter. Goldman's William Tanona predicted an $18.7 billion reduction.
Citigroup shares fell $1.12 to $27.14 at 4:17 p.m. in New York trading. The stock is down 7.8 percent this year.
Moszkowski also cut his fourth-quarter earnings estimates for JPMorgan Chase & Co. to 94 cents a share from $1.04, saying the No. 3 U.S. bank after Citigroup and Bank of America Corp. may have to write down the value of subprime assets by about $1.4 billion.
To contact the reporter on this story: Edward Evans in London at at eevans3@bloomberg.net
Last Updated: January 8, 2008 16:37 EST
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Posting #23: Fri Jan 11th, 2008 01:12 |
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Credit Derivatives May Lose $250 Billion, Gross Says (Update4)
By Caroline Salas
Jan. 8 (Bloomberg) -- Credit-default swaps, used to help protect against the risk a company won't pay its debt, may cause losses of $250 billion this year, helping send the U.S. economy into a recession as corporate defaults rise, Pacific Investment Management Co.'s Bill Gross said.
``Credit-default swaps are perhaps the most egregious offenders'' in today's banking system, Gross wrote on the company's Web site today. ``Our modern shadow banking system craftily dodges the reserve requirements of traditional institutions and promotes a chain letter, pyramid scheme of leverage, based in many cases on no reserve cushion whatsoever.''
The Federal Reserve will probably cut its benchmark interest rate to 3 percent by mid-year from 4.25 percent as losses on credit-default swaps contribute to a slowing U.S. economy, wrote Gross, who manages the world's largest bond fund. The market for outstanding credit-default swap contracts grew to $45.5 trillion during the first half of last year from $632 billion at the end of June 2001, according to the International Swaps and Derivatives Association, an industry group.
Goldman Sachs Group Inc. ``estimates that mortgage related losses of $200-$400 billion alone might lead to a pullback of $2 trillion of aggregate lending,'' Gross said. ``Add to that my $250 billion loss estimate from CDS, as well as prospective losses in commercial real estate and credit cards in 2008 and you have a recipe for a contraction in credit leading to a recession.''
`Goldman Sachs Wins'
Credit-default swaps are financial instruments based on bonds and loans that are used to speculate on a company's ability to repay debt. They pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements. A rise indicates deterioration in the perception of credit quality; a decline, the opposite.
Assuming default rates on corporate bonds reach historical averages of about 1.25 percent, $500 billion of credit-default swap contracts will be triggered, causing losses of $250 billion to sellers of the derivatives after accounting for the recovery value of the securities, Gross said.
``Of course, `buyers of protection' will be on the other `winning' side, but the point is that as capital gains and capital losses slosh from one side of the shadow system's boat to the other, casualties and shipwrecks are the inevitable consequence,'' Gross said. ``Goldman Sachs wins? Fine, but the losers in many cases will not be back for a return match.''
`Held Up Well'
Gross was named fixed-income manager of the year in 2007 by Chicago-based Morningstar Inc. The $112.7 billion Pimco Total Return fund returned 9.07 percent last year, in the 94th percentile, Bloomberg data show.
``Mr. Gross is correct that the market for CDS is large,'' ISDA Chief Executive Officer Robert Pickel said in a statement. ``While adverse price movement undoubtedly pushes bids and offers further apart, as it does in any market, liquidity in, and the mechanics of, the CDS market have held up well in the face of a challenging credit environment.''
The global default rate on high-yield, high-risk bonds will climb more than fivefold by the end of this year to 4.8 percent as the economy weakens, Moody's Investors Service forecast today. High-yield, or junk, bonds are those rated below Baa3 by Moody's and BBB- by Standard & Poor's.
`Shadow Banking'
``The withdrawal of deposits from our new-age shadow banking system has frightening potential consequences,'' Gross said. ``Pyramid schemes and chain letters collapse because there is no more credit to feed them. As the system of modern day levered shadow finance slows to a crawl, or even contracts at the edges, its ability to systematically fertilize economic growth must be called into question.''
Gross has expressed concern in his last four monthly outlooks about the ``shadow banking system,'' which was created by ``the loose regulation and financial innovation of the past 35 years'' and ``where credit is composed on a keyboard as opposed to a printing press,'' he said in his November piece.
Pimco currently has a ``credit-lite'' position and is interested in buying bonds of banks and investment banks that are rated AA or A, and yield about 200 basis points more than similar-maturity Treasuries, Gross wrote in an e-mailed response to questions.
Defaults to Rise
Our position ``assumes that as the year progresses that we re-enter `high-quality corporate markets' at increasingly wider spreads,'' Gross said in the e-mail. ``We will wait to enter lower investment-grade/high-yield markets until recessionary conditions/higher defaults begin to become obvious. We estimate that will be in the second half of the year.''
The extra yield, or spread, investors demand to own the average investment-grade corporate bond instead of Treasuries has more than doubled since 2006 to 211 basis points, according to Merrill Lynch & Co. index data. High-yield spreads have also more than doubled in the same period to 645 basis points, Merrill data show. A basis point is 0.01 percentage point.
U.S. construction companies are ``certainly in danger to a high extent'' as are companies with exposure to the U.S. consumer, Axel Potthof, investment manager at Pimco in Munich, said in an interview today.
To contact the reporter on this story: Caroline Salas in New York at csalas1@bloomberg.net
Last Updated: January 8, 2008 13:58 EST
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prophet
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Posting #24: Tue Jan 15th, 2008 00:11 |
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This is not merely a subprime crisis
By Wolfgang Munchau
Published: January 14 2008 02:00 | Last updated: January 14 2008 02:00
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If this had been a mere subprime crisis, it would now be over. But it is not, and nor will it be over soon. The reason is that several other pockets of the credit market are also vulnerable. Credit cards are one such segment, similar in size to the subprime market. Another is credit default swaps, relatively modern financial instruments that allow bondholders to insure against default. Those who such sell such protection receive a quarterly premium, based on a percentage of the amount insured.
The CDS market is worth about $45,000bn (£23,000bn). This is not an easy figure to imagine. It is more than three times the annual gross domestic product of the US. Economically, credit default swaps are insurance. But legally, they are not, which is why this market is largely unregulated.
Technically, they are swaps: two parties swap payments streams - one pays a regular premium for protection, the other pays up in case of default. At a time of low insolvency rates, many investors used to consider the selling of protection as a fairly risk-free way of generating a steady stream of income. But as insolvency rates go up, so will be the payment obligations under the CDS contracts. If insolvencies reach a certain level, one would expect some protection sellers to default on their obligations.
So the general health of this market crucially depends on the rate of insolvencies. This in turn depends on the economy. The US and Europe are the two largest CDS markets in the world. It is now widely recognised, including by the Federal Reserve, that the US economy is heading for a sharp downturn, possibly a recession. The eurozone, too, is heading for a downturn, but possibly not quite as sharp.
According to the National Bureau of Economic Research, the average length of US recession, excluding the 2001 recession, was 11 months. The 2001 recession was shorter, which brings down the average to about 10 months. The US has been quite lucky. Germany, for example, suffered a downturn at the beginning of this decade. It lasted a near eternity - 15 quarters - and included two separate technical recessions. Interestingly, and perhaps most relevant to today's debate, is the fact that this downturn was also aggravated by a national credit squeeze. German banks cleaned up their balance sheets after a decade of binge-lending.
The German experience has taught us that persistent problems in financial transmission channels cause long economic downturns. Today, the really important question is not whether the US can avoid a sharp downturn. It probably cannot. Far more important is the question of how long such a downturn or recession will last. An optimistic scenario would be a short and shallow downturn. A second-best scenario would be for a sharp, but still short, recession.
A truly awful scenario would be a long recession. The US did experience some longish recessions in the past, for example from November 1973 until March 1975, but there was no CDS market around at the time.
So what then would be the effects of these scenarios on the CDS market? Bill Gross of Pimco*, who runs the world's largest bond fund, last week produced an interesting back-of-the-envelope calculation that received widespread publicity. He projected that the losses from credit default swaps caused by a rise in bankruptcies could be $250bn or more - which would be similar to the expected total loss as a result of subprime.
This is how he arrived at this estimate. His calculation assumes that the corporate insolvency rate would return to a normal level of 1.25 per cent (measured as the default rate of all investment grade and junk debt outstanding). As the entire CDS market is worth about $45,000bn, $500bn in CDS insurance would be triggered under this assumption. The protection sellers would probably be able to recover some of this, so the net loss would come to about half of that. This estimate is very rough, of course. Most important, it is based on the assumption that the hypothetical US recession would not turn into a prolonged slump. In that case, one would expect corporate default rates not merely to return to trend, but to overshoot in the other direction.
So one could take that calculation as a starting point. A downturn lasting two years could easily trigger payments streams of a multiple of $250bn.
At this point we might be tempted to conclude that this all is irrelevant, since this is only insurance, which is a zero-sum financial game. The money is still there, only somebody else has got it. But in the light of the current liquidity conditions in financial markets, that would be a complacent view to take.
If protection sellers were to default en masse, so too could some protection buyers who erroneously assume that they are protected. Given that the CDS market is largely unregulated there is no guarantee of sufficient liquidity behind each contract.
It is not difficult at all to see how the CDS market has the potential to cause serious financial contagion. The subprime crisis came fairly close to destabilising the global financial system. A CDS crisis, under a pessimistic scenario, could produce a global financial meltdown.
This is not a prediction of what will happen, merely a contingent scenario. But it is contingent on an event - a nasty and long recession - that is not entirely improbable.
*Investment Outlook, January 2008, http://www.pimco.com
munchau@eurointelligence.com
Copyright The Financial Times Limited 2008
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prophet
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Posting #25: Wed Jan 16th, 2008 00:01 |
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WHERE IS STOCKRAIDER?? 
Citigroup Posts Record Loss on $18 Billion Writedown (Update6)
By Bradley Keoun
Jan. 15 (Bloomberg) -- Citigroup Inc. posted the biggest loss in the bank's 196-year history as surging defaults on home loans forced it to write down the value of subprime-mortgage investments by $18 billion.
The fourth-quarter net loss of $9.83 billion, or $1.99 a share, compared with a profit of $5.1 billion, or $1.03, a year earlier, the New York-based bank said in statement. Citigroup reduced its dividend by 41 percent and is selling $14.5 billion of preferred stock to investors including the government of Singapore to shore up depleted capital. Chief Executive Officer Vikram Pandit eliminated 4,200 jobs and plans more cuts.
The results are ``unacceptable,'' Pandit said today on a conference call with analysts and investors. He was installed in December after Charles ``Chuck'' Prince stepped down amid mounting subprime losses. ``We need to do better, and we will.''
Citigroup fell 7.3 percent in New York trading as the largest U.S. bank warned of rising delinquencies on its $214 billion portfolio of home loans and said more credit-card and auto loans were going bad. The bank cited a slowing economy in setting aside $5.2 billion to cover loan losses in its U.S. consumer division, about five times the year-earlier amount.
The markdown on subprime securities, almost double what the company forecast in November, also was the biggest so far among the world's top financial companies, exceeding the $14 billion taken by Zurich-based UBS AG, Europe's largest bank.
Alwaleed, Weill
Citigroup obtained a portion of the new capital from a handful of its biggest investors, including Los Angeles-based Capital Group Cos., Saudi Prince Alwaleed bin Talal and the New Jersey Division of Investment. Former CEO Sanford I. Weill, who owned almost 17 million Citigroup shares as of April 2006, also bought preferred stock.
``They've got themselves in a deep, desperate hole and it's going to take them all of 2008 to work their way out of it,'' Jon Fisher, who helps manage $22 billion at Minneapolis-based Fifth Third Asset Management, said in an interview on Bloomberg TV. Fifth Third owns shares of Citigroup. ``There are probably issues on their balance sheet that the management team, who's only really been running the company for about a month, doesn't even know about.''
The net loss exceeded analysts' estimates of 97 cents a share, according to a survey by Bloomberg. Citigroup has lost about half its market value in the past year, falling $2.12 today in New York Stock Exchange composite trading to $26.94 as of 4 p.m. It was the lowest price since 2002.
Rating Downgrade
Standard & Poor's reduced its long-term rating on Citigroup to AA- from AA after the earnings announcement, reflecting the ``severe losses'' and the likelihood that the bank's 2008 performance ``could be rocky.''
Founded in 1812 as the City Bank of New York, Citigroup cut its quarterly dividend to 32 cents a share from 54 cents. The reduction, the first since the modern company was formed from the 1998 merger of Citicorp and Travelers Group Inc., will allow the bank to retain about $4.4 billion of additional capital per year. As recently as November, Robert Rubin, the former U.S. Treasury secretary who chairs the bank's executive committee, had pledged to spare the dividend.
Citigroup had to turn to outside investors for fresh capital for the second time in two months. The bank generated $12.5 billion by selling convertible preferred shares to private investors, including $6.88 billion to an investment fund controlled by the government of Singapore. Another $2 billion of preferred shares will be sold to the public.
Abu Dhabi
In November, the bank got a $7.5 billion injection from the ruling family of the Middle Eastern emirate Abu Dhabi, and it raised about $4.3 billion during the fourth quarter by selling about $4.3 billion of ``enhanced trust preferred securities.'' In all, Citigroup has raised about $26.3 billion, helping to allay concern that the company might run short of capital.
``Capital adequacy should no longer be a near-term issue,'' Sandler O'Neill & Partners analyst Jeff Harte said in a note to clients.
Citigroup's credit-default swaps -- financial instruments that fixed-income traders use to bet on a company's default risk -- fell by 2 basis points to 83, indicating a lower likelihood of default, according to Phoenix Partners Group.
Alwaleed, the 52-year-old billionaire, already owns 4 percent of the company. He has been Citigroup's biggest individual shareholder since the early 1990s, when soured investments in commercial real estate left corporate predecessor Citicorp short of funds. In 1991, then-CEO John Reed suspended the bank's dividend, and he didn't restore it until 1994.
Weill's Strategy
Weill, 74, spent 17 years building Citigroup through a series of bank, brokerage and insurance-company mergers, ultimately beating out Reed for the top job, retiring as CEO in 2003 and naming Chuck Prince his successor.
The decision to cut about 1.1 percent of the company's 375,000 employees as of the end of 2007 follows Pandit's pledge in December to conduct a ``front-to-back'' expense review of the company. The workforce had swelled from 327,000 at the end of 2006, even as Prince and former Chief Operating Officer Robert Druskin eliminated about 17,000 jobs.
Pandit, 51, said on the conference call that the review isn't over, and today's job announcement was only a ``down payment.''
Pandit aims to complete his cost review by April and may announce then whether to sell or spin off businesses within Citigroup, which spans 100 countries, according to two people familiar with the situation. Some analysts, including Deutsche Bank AG's Mike Mayo, have called for a breakup, saying the company is too unwieldy to manage.
Investment Banking
The latest job cuts, scheduled to take place this month, are mostly in the company's trading and investment-banking division, which posted a fourth-quarter loss of $11 billion after earning $1.75 billion a year earlier.
Citigroup's overall revenue in the fourth quarter fell 70 percent from a year earlier to $7.22 billion, while operating expenses climbed 18 percent to $16.5 billion. The company's consumer-banking unit had net income of $756 million, down 71 percent from the prior year, and earnings at the global wealth management division, which includes the Smith Barney brokerage, rose 27 percent to $523 million.
For the full year, Citigroup had a $3.62 billion profit, down 83 percent from 2006.
`Skyrocketing' Losses
``Consumer loss rates are skyrocketing,'' Meredith Whitney, an analyst at CIBC World Markets, said in a Bloomberg TV interview. Whitney estimated additional charges or loan losses of between $5 billion and $10 billion.
The fourth quarter may be the worst earnings period for the financial industry since the Great Depression. Analysts estimate Merrill Lynch & Co., the biggest U.S. brokerage, will report a record loss of more than $3 billion after writing down the value of mortgage-related securities, and Bank of America Corp., the second-largest U.S. bank by assets after Citigroup, may report its biggest profit decline since its formation in 1998 from the merger of BankAmerica and NationsBank.
Bank of America may report an 80 percent drop in fourth- quarter net income next week, and JPMorgan Chase & Co., the third-biggest U.S. bank, may post a 31 percent decline in earnings tomorrow.
``There seems to be no end of bad news,'' Laszlo Birinyi, president of Birinyi Associates Inc., whose research and investment firm oversees $300 million in Westport, Connecticut, said in an interview with Bloomberg Television.
To contact the reporter on this story: Bradley Keoun in New York at bkeoun@bloomberg.net .
Last Updated: January 15, 2008 16:25 EST
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prophet
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Posting #26: Wed Jan 16th, 2008 00:03 |
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RESCUE ME!
Citigroup, Merrill Receive $21 Billion From Investors (Update3)
By Yalman Onaran
Jan. 15 (Bloomberg) -- Citigroup Inc. and Merrill Lynch & Co., two of the largest financial institutions in the U.S., turned to outside investors for a second time in two months to replenish capital eroded by subprime-mortgage losses.
Citigroup, the biggest U.S. bank, is getting $14.5 billion from investors including the governments of Singapore and Kuwait, former Chairman Sanford Weill and Saudi Prince Alwaleed bin Talal, the New York-based company said today in a statement. Merrill, the largest brokerage, will receive $6.6 billion from a group led by Tokyo-based Mizuho Financial Group Inc., the Kuwait Investment Authority and the Korean Investment Corp.
Wall Street banks have raised $59 billion, mostly from investors in the Middle East and Asia, to shore up balance sheets battered by more than $100 billion of writedowns from the declining values of mortgage-related assets. Citigroup was propped up in November by a $7.5 billion investment from the Abu Dhabi Investment Authority. New York-based Merrill was helped by a $5.6 billion cash infusion last month from Singapore's Temasek Holdings Pte. and U.S. fund manager Davis Selected Advisors LP.
``The only reason the banks are raising capital from the Middle East and Asia is because those are the only people who have the excess capital to lend,'' said Jon Fisher, who helps oversee $22 billion at Minneapolis-based Fifth Third Asset Management, which holds shares of Citigroup and Merrill.
Citigroup declined $2.12, or 7.3 percent, to $26.94 at 4 p.m. in New York Stock Exchange composite trading. Merrill fell $2.96, or 5.3 percent, to $53.01.
Tier 1 Capital
Writedowns have reduced Citigroup's Tier 1 capital ratio, which regulators monitor to assess a bank's ability to absorb loan losses. Without new capital, the ratio would fall to about 7 percent, Goldman Sachs Group Inc. analyst William Tanona estimated last month, compared with the 6 percent needed to maintain ``well-capitalized'' status from federal regulators. Today's capital increase will put the Tier 1 ratio at 8.2 percent, said Citigroup, which has a 7.5 percent target.
``The company going into this announcement was in an extremely precarious capital position,'' Oppenheimer & Co. analyst Meredith Whitney said in a Bloomberg TV interview. ``They're shaking down the global money tree and basically raising money from any source they can.''
Morgan Stanley, UBS AG, Merrill Lynch & Co. and Bear Stearns Cos. also reached out to sovereign wealth funds or state-controlled investment authorities in Asia for money after bad investments depressed profits. The investments don't give the sources of new capital any extra say in the management of the companies, such as board seats.
Capital Cost
``It does show that investors aren't completely ignoring the sector,'' said Peter Plaut, a senior credit analyst at Sanno Point Capital Management, a hedge fund based in New York. ``They are putting in capital but it's at a cost. Now it's up to the CEOs to be able to generate returns that exceed that cost of capital.''
The Kuwait Investment Authority, which invested in both Merrill and Citigroup, was formed by the Middle East's fourth- biggest oil producing country in the 1980s to manage the nation's wealth. Kuwait may have as much as $250 billion of assets, compared with about $875 billion for the Abu Dhabi Investment Authority, the world's largest sovereign wealth fund, according to an estimate by Morgan Stanley analyst Stephen Jen.
The Government of Singapore Investment Corp. invested almost $7 billion in Citigroup convertible preferred securities and said in a statement today that it will own about 4 percent of the bank if the securities are turned into shares.
Dividend Yields
With a 4 percent stake, Alwaleed has been Citigroup's biggest individual shareholder since the early 1990s, when soured investments in commercial real estate left corporate predecessor Citicorp short of capital.
Singapore and Alwaleed, along with Los Angeles-based Capital Group Cos., the biggest U.S. manager of stock and bond mutual funds, Kuwait, the New Jersey Division of Investment and Weill, will receive a 7 percent annual dividend from the investment in Citigroup.
Merrill's convertible securities will pay a 9 percent annual dividend until they automatically turn into Merrill shares in 2 3/4 years. Citigroup can force conversion into shares after five years if the stock price more than doubles. When converted, the shares will dilute the existing shareholders' stakes.
Citigroup will pay $875 million a year in dividends to the new shareholders. Merrill Lynch will distribute $594 million annually.
Asian Cash Boosted
Record oil prices have led to windfall profits for the six countries of the Gulf Cooperation Council, who own around 40 percent of the world's proven oil reserves. Chinese and other Asian countries have amassed foreign currency reserves partly through surging exports to the U.S. The U.S. trade deficit widened 9.3 percent in November, the most in two years, the Commerce Department said last week.
``It is a testament to the weakness of the dollar that foreign governments and banks see this as a relatively inexpensive way to buy into a major US financial institution,'' said Anthony Sabino, a business law professor at St. John's University in New York.
Foreign investors whose stakes rise about 10 percent trigger a review by the U.S. Committee on Foreign Investment, which examines whether acquisitions by overseas buyers compromise national security.
U.S. Securities and Exchange Commission Chairman Christopher Cox said in December that the growth of state-run investment funds may lead to an increase in political corruption because governments might abuse the funds' leverage over markets and companies.
`Hand-wringing'
While there may be ``hand-wringing'' in Washington over the investments, there won't be an attempt to tighten rules on foreign investors, said Todd Malan, executive director of the Organization for International Investment.
``Congress realizes that we need this investment,'' said Malan, whose Washington-based group represents 141 non-U.S. companies investing in the country.
The following is a table showing banks and securities firms that have sold stakes to shore up capital. All except Barclays Plc raised the cash after reporting asset writedowns and credit losses amid the collapse of the U.S. subprime-mortgage market.
Firm Infusion Investor Stake
($billion)
Citigroup $6.8 Government of Singapore 3.7%
Investment Corp.
$7.7 Kuwait Investment Authority; 4.1%*
Alwaleed bin Talal; Capital
Research; Capital World;
Sandy Weill; public investors.
$7.5 Abu Dhabi Investment
Authority 4.9%
Merrill Lynch $6.6 Korean Investment Corp.; 10-11%**
Kuwait Investment Authority;
Mizuho Financial Group
$4.4 Temasek Holdings 9.4%
$1.2 Davis Selected Advisors 2.6%
UBS $9.7 Government of Singapore
Investment Corp. 10%
$1.8 Unidentified Middle Eastern
Investor 2%
Morgan Stanley $5 China Investment Corp. 9.9%
Barclays (a) $3 China Development Bank 3.1%
$2 Temasek Holdings 2.1%
Canadian $1.5 Li Ka-Shing; Manulife 6.1%***
Imperial Financial; Caisse de Depot
et Placement du Quebec; OMERS
$1.2 Public investors 5%***
Bear Stearns $1 Citic Securities Co. 6%
(b)
_____
TOTAL $59.4
* Estimate based on Government of Singapore's stake.
** Estimate based on share price range given by the firm.
*** Estimate based on share prices announced by the firm.
(a) Barclays is buying back shares to neutralize stake sale.
(b) Bear Stearns is also investing $1 billion in Citic.
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To contact the reporter on this story: Yalman Onaran in New York at yonaran@bloomberg.net .
Last Updated: January 15, 2008 16:11 EST
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stockraider1
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Posting #27: Wed Jan 16th, 2008 03:10 |
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Hi Prophet,
Citi at US 26 is a very good buy.I see this this huge losses announce will eventually getting behind them.
The large support from sovereign fund on Citi is a positive vote of support n confidence on the franchise strength of citi.
As for me i actually bought a small exposure on citi about 200 shares at around US 29.5 and it managed to dispose at US 32.5.
I make a very small profit.
I will be getting in again at price not more than US 26.5 say 300 shares to test my hypothesis again,this time i m going to ride it long for 3 years thru thick n thin!.There is a big disadvantage for Msian to trade US stocks as the transaction cost is very high.
Do not be worry about all this sub-prime issues this losses is anticipated and perhaps by 31-3-2008 qtr all the final anticipated cost will surface and banking will get ahead of the curve.
The positive scenario is that FED will further cut rates making cost of funding cheap.
Very good for global business such as CITI which has fallen by more than 50% since the crisis.
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stockraider1
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Posting #28: Wed Jan 16th, 2008 03:42 |
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Opps ! sorry accidentally repeated 3 times.
Feel free to remove !
Thanks
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prophet
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Posting #29: Mon Jan 28th, 2008 00:38 |
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Stock market turmoil spells trouble on the horizon
By Peter Koenig
Last Updated: 12:17am GMT 27/01/2008
Page 1 of 3
After a stormy week in the markets, just how gloomy is the outlook as the financial crisis rumbles on Peter Koenig takes the temperature
At 10pm on September 13, as he does almost every night, Denis Norton was settling down to watch Sky News in the first-floor living room of his recently built townhouse in Kingston upon Thames.
The latest news and analysis of the UK and world economy
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George Soros, the world's most famous hedge fund manager,
reckons the financial crisis is the worst since the Second World War
Having just returned from his summer holiday, he had spent most of that Thursday catching up on household admin and chores, and was expecting the news to be dominated by the foot and mouth crisis.
Instead, he found himself watching with increasing horror as Sky led the broadcast with the news that the Bank of England had agreed to give emergency funding to Northern Rock, the bank in which he and his wife, Marie, had their life savings.
Norton, a retired director of a logistics company, called upstairs to Marie, who had just got out of the bath. "Put Sky News on! It's about Northern Rock!"
The next morning at 8.30 the couple, both in their 60s, boarded the number 65 bus for the 10 minute journey into Kingston town centre and then spent the next seven hours in a queue. "We'd like to close our accounts," they said when they finally reached the cashier. They needn't have bothered. Slipping their pink passbooks under the security grille, their expressions told the haunted Northern Rock employee all she needed to know.
One result of the financial crisis could be
the transfer of power from West to East
Reflecting on Northern Rock's collapse, Norton concludes: "The simple rule seems to be that you should trust nobody."
Fast forward four months to last week and the Government's announcement that it was finally putting a lid on Northern Rock. The problem was that at virtually the same moment Alistair Darling, the Chancellor, was making his Monday announcement, stock markets round the world were crashing.
On Tuesday the markets lurched up as the Federal Reserve slashed US interest rates by three quarters of a percentage point - the biggest cut since 1982. On Wednesday they sagged as investors judged the Fed's move a sign of panic. On Thursday they surged again on optimism that the situation was more manageable than it had seemed. On Friday the FTSE100 index closed virtually flat on the week.
As for Norton, he spent the week with his head below the parapet. "We have our money in other building societies now," he says. "We've spread it round so we're covered by deposit insurance. But I still don't like what's going on."
George Soros, the world's most famous hedge fund manager, supports Norton's bleak view, pronouncing the financial crisis the worst since the Second World War.
The Treasury remains upbeat. "The UK economy is currently experiencing its longest unbroken expansion since records began, having expanded for 61 consecutive quarters, and is forecast to be the fastest growing economy in the G7 this year," it says.
Speaking in Bristol on Tuesday, Mervyn King, the Governor of the Bank of England, offered, as he likes to say, a more nuanced view. "Tighter credit conditions," he said, "will slow economic activity, possibly quite sharply."
Vince Cable, the Liberal Democrats' economic spokesman, who has been the Government's most trenchant economic critic, summed up the situation in one word: "fragile".
He said: "The sky is full of dark clouds. There's lots of thunder and lightning on the horizon. So far we haven't had much rain. But if there's deflation in the housing market, there will be very serious problems."
Underlying the conflicting forecasts are conflicting interpretations of the five-month-old financial panic. Optimists say we're at a low point in the still manageable economic cycle. Pessimists say we're at a turning point in economic history on the order, possibly, of the 1930s.
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prophet
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Posting #30: Mon Jan 28th, 2008 00:40 |
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The sole point of agreement is that the financial system has yet to return to normal. Monday's crash, according to the consensus, followed from the growing view that trouble was brewing in a part of the financial system that had not yet attracted attention.
George Magnus, the senior economic adviser to UBS investment bank, attributes Monday's events to fears that "a new blockage in the credit arteries" had popped up. He traced this blockage to "yet another esoteric corner of the financial markets".
Specialist financial companies called monoline insurers operating deep within the bowels of the financial system insure banks against bonds going bad. Ten days ago the credit agency Fitch downgraded one such company, Ambac. Investors feared that other investors would panic about the prospect of further downgrades to monolines, or even outright insolvencies. Fears over a monoline insurance meltdown boiled into panic.
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Then on Wednesday New York state financial authorities said they were dealing with the problem. They were, they said, encouraging banks to string together a safety net for monoline insurers. Stock markets recovered. Investors jumped at the buying opportunity that Monday's crash represented. Prices surged.
Now markets are back close to where they were a week ago, with investors one degree more jittery. The debate is back to where it was before all the excitement: how much will the financial crisis drag down economic growth Will there be a recession or won't there
As King put it in Bristol: losses resulting from the collapse of the US housing market "pose a threat to the ability of the banking system to finance continued economic growth".
In Britain, in addition to a financial crisis threatening recession, political problems loom in the management of the crisis. The one-word summary of these problems is "dithering".
Last week, in response to the market crash in the US, not only did the Federal Reserve cut US interest rates by 0.75 percentage points but Washington moved forward on a $150bn (£75bn) plan to stimulate the American economy with tax cuts and extra government spending.
In the UK, in contrast, King used his Bristol speech to balance his concerns about a recession with his concerns about inflation. King's supporters point out that the Bank of England's mandate is more specifically anti-inflationary than the Fed's. King's critics say he is not only too worried about inflation but also still intent on making bankers pay for their reckless lending so that they won't do it again. They characterise this approach as central banking as equivalent to Nero's fiddling while Rome burned.
"The Bank has this hair shirt thing - after the feast, the famine. Then the Bank says, oh, and we're worried about inflation too," says Magnus.
He maintains that the Bank should worry less about inflation and more about "mitigating the depth and duration of the downturn".
Critics of the Government see worse dithering in 10 Downing Street. The Government rejects the charge. Asked for its interpretation of the five-month-old crisis, the Treasury referred to a statement Gordon Brown made on December 17: "What the British people need to know is that there is not going to be a repeat of the events of stop-go and boom-and-bust that we had in the past."
Critics say Brown is fighting yesterday's economic wars. The plan to return Northern Rock to stability is clever, they say. The Government will get back the £25bn it has loaned to Northern Rock through a sale of government-guaranteed Northern Rock bonds.
But, the critics add, the plan is politically motivated and exposes the taxpayer to future losses if investors call on the Government's guarantees. Brown, they say, was concerned above all in Northern Rock to avoid the charge that he had nationalised the bank, showing his true Old Labour colours.
"For a long time people stopped thinking about the economy," says Philip Hammond, the shadow chief secretary to the Treasury. "Gordon Brown fostered this with his talk of abolishing economic cycles. Now people are waking up to the fact that their job and income security is worse than it was several months ago. They're going to get angry."
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