Probably all known by now but John Paulson bought a rather large stake C this past Q while scaling back his BAC, GS, etc. positions. C was trading up AH and BAC flat to slightly down. Maybe this will finally push C towards 5$ for good.
Were you still waiting for the $3.50’s or did you pull the trigger?
Probably all known by now but John Paulson bought a rather large stake C this past Q while scaling back his BAC, GS, etc. positions. C was trading up AH and BAC flat to slightly down. Maybe this will finally push C towards 5$ for good.
Were you still waiting for the $3.50’s or did you pull the trigger?
I missed the move on C and will not add to my position. I’m already long 2.50 and 5.00 2011 calls. C is more a trade for me and when the indices were a little weak the past week (say that 10 times fast) I opted to stay more neutral. I think the bottom on C is in with Paulson’s signature on C. Notice C said they’ve had good success with reworking mortgages in Florida (saw it on Bloomberg I think). Also notice banks reporting lower charge off rates on consumer credit cards.
Probably all known by now but John Paulson bought a rather large stake C this past Q while scaling back his BAC, GS, etc. positions. C was trading up AH and BAC flat to slightly down. Maybe this will finally push C towards 5$ for good.
Were you still waiting for the $3.50’s or did you pull the trigger?
I missed the move on C and will not add to my position. I’m already long 2.50 and 5.00 2011 calls. C is more a trade for me and when the indices were a little weak the past week (say that 10 times fast) I opted to stay more neutral. I think the bottom on C is in with Paulson’s signature on C. Notice C said they’ve had good success with reworking mortgages in Florida (saw it on Bloomberg I think). Also notice banks reporting lower charge off rates on consumer credit cards.
NEW YORK -(Dow Jones)- Among major investment banks, Citigroup Inc. (C) and Goldman?Sachs?Group (GS) have made the biggest strides deleveraging their balance sheets while Deutsche?Bank?AG (DB) is a “clear laggard” that may be forced to recapitalize, JMP?Securities analyst Michael Hecht said Monday.
Leverage is one of the measures used to examine a company’s risk, and too much of it at banks has been cited as the spark that ignited the financial crisis. Most banks have taken steps to reduce debt and build assets in the last year. To the extent that they succeed or fail, investors factor the result into their risk assessments, including any need to recapitalize.
By the same token, banks building up trading operations and other earnings drivers normally need to expand their balance sheets, which means higher leverage.
Hecht attempted to gauge investment banks’ leverage by comparing their tangible common equity to their tangible assets, and then comparing that ratio to historical averages. Citi’s ratio of 18.5 in the third quarter came in lower than its historical average of 27.4. The same was true for Goldman, which dropped to 16.4 from 27.3.
But the analyst also found that Deutsche Bank’s leverage has increased significantly. Its ratio of tangible common equity to tangible assets is 66.2 as of the third quarter, compared to a historical average of 46.3.
“Deutsche Bank, both on an absolute and relative basis, is the clear laggard among the group, and will likely be forced to recapitalize given our expectation for stricter regulatory capital requirements going forward,” Hecht wrote in a Monday note to clients.
The comparison isn’t completely apples to apples. European banks historically have maintained higher leverage than U.S. banks, Hecht noted.
Moreover, the concern voiced on Deutsche Bank is premised in part on regulatory capital changes that haven’t yet taken place.
Deutsche Bank officials did not immediately respond to a request for comment. Nor did officials at Citigroup and Goldman Sachs.
Citigroup shares recently fell 1 cent to $4.17 while Goldman was down 26 cents to $177 and Deutsche Bank was off 47 cents to $77.
-By Brendan Conway, Dow Jones Newswires; 212-416-2670; brendan.conway@ dowjones.com
I appreciate that this is all completely hypothetical, but I am interested in the take of US AFB members, who will have a far better feel for the question than others who live elsewhere. Vikram Pandit has made the point on more than one recent occasion, that the Government can sell their stake in C at any time. Over several weeks now I have observed some seemingly pretty strange buy/sell action on C. Suppose for a moment that yesterday’s “story” re TARP banks being asked for a repayment schedule either doesn’t apply to C, or is a smokescreen, what are people’s views on:
1. The likelihood of USG selling some or all of their 34% on the open market at market prices as against pre-agreed sales to institutions at a set price.
2. In the event that there have been (or will be) open market sales, the prospects keeping that secret. Obviously if it is already occurring, someone has been able to do it on the quiet, which itself seems odd to me, given the potential political capital that could be made. Is it likely that interested politicians could be prevailed upon to keep silent in the national interest?
I appreciate that this is all completely hypothetical, but I am interested in the take of US AFB members, who will have a far better feel for the question than others who live elsewhere. Vikram Pandit has made the point on more than one recent occasion, that the Government can sell their stake in C at any time. Over several weeks now I have observed some seemingly pretty strange buy/sell action on C. Suppose for a moment that yesterday’s “story” re TARP banks being asked for a repayment schedule either doesn’t apply to C, or is a smokescreen, what are people’s views on:
1. The likelihood of USG selling some or all of their 34% on the open market at market prices as against pre-agreed sales to institutions at a set price.
2. In the event that there have been (or will be) open market sales, the prospects keeping that secret. Obviously if it is already occurring, someone has been able to do it on the quiet, which itself seems odd to me, given the potential political capital that could be made. Is it likely that interested politicians could be prevailed upon to keep silent in the national interest?
I think that Citi would be given first right of refusal to buy back .gov’s stock before .gov dumping it on the open market.
Treasury Department officials said Monday they will step up pressure on the 71 companies participating in the government’s $75 billion effort to stem the foreclosure crisis. The will start this week by sending three person “SWAT teams” to monitor the eight largest companies’ work and requesting twice-daily reports on their progress.
So Dick Bove is saying 26 of 30 major US banks will need to raise capital by the end of this month assuming the Treasury increases tier 1 capital requirements to 12% and common to 8% PLUS paying back TARP. Hasn’t treasury been pushing worldwide to NOT take stimulus away and why would banks time TARP repayments with this new “supposed’ capital requirements. C per his analysis would not need additional capital (state street and two others were on his list). Doesn’t sound like the best analysis to me.
Let’s see here, just tell ‘em to make smaller payments, forget that you just gave them FREE MONEY or FREE REAL ESTATE, and they won, you lost, and pretend it was a great deal.
Such genius!
They should offer those to everyone { with time, they seem like they will be forced to, as this thing implodes } and then they can declare “RECORD PROFITS” and the smoke and mirrors shellgame continues for the next round.
Now, IF sane people were making these “deals” the FREE would be removed, and a PARTNERSHIP instituted. The homeowners would agree that the ownership of “THEIR” home, would be a joint ownership with the writedown translated into a percentage ownership of the mortgage holder. Say you got a CRAMDOWN offer lowering your payment by 30%, you would then have to sign an addendum whereby upon sale, the PROFIT { remember that word when applied to RE?} would be split 70-30. That way, the homeowner can stay, forclosure is avoided, and ultimately there might be some “backend” for both.
This current program, just amounts to SUBSIDIZING ineptitude, bad judgement, and REWARDS those who in many cases will scam the system yet one more time.
Willem Buiter , Citigroup’s new chief economist, didn’t mince his words in April—referring to his now-employer as—->>>>> “a conglomeration of worst-practice from across the financial spectrum” <<<<—- on a Financial Times blog. Is Dubai another example to back up that criticism?
With the credit crunch in full swing last December, then-chairman Sir Win Bischoff said the bank’s arrangement of $8 billion of financing for Dubai public-sector entities was “in line with our commitment to the UAE market in general, and reflects our positive outlook on Dubai in particular.” In May 2008, Citi had also moved Alberto Verme , then global co-head of investment banking, to Dubai.
Fast-forward to today, and the former boomtown is roiling global markets after government-controlled conglomerate Dubai World sought a sudden stand-still on debt payments.
Compared with other blunders, Citi’s believed $1.9 billion of exposure to Dubai isn’t huge. But it leaves the thorny question of where else Citi kept dancing after the music had stopped.
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Because of an investment deal struck two years ago, early in the financial crisis, the United Arab Emirates’ sovereign fund will soon start purchasing $7.5 billion in Citigroup shares at $31.83 apiece, Citi confirmed in a statement Wednesday, even though the New York bank’s stock closed at $4.10.
Bloomberg reporting the sale of about a billion shares, which may well have added to the recent selling pressure.
“Kuwait Investment Fund Sells Citigroup Stake for $4.1 Billion
By Fiona MacDonald and Poppy Trowbridge
Dec. 6 (Bloomberg)—Kuwait Investment Authority, the nation’s sovereign-wealth fund, sold its stake in Citigroup Inc. for $4.1 billion after helping the U.S. bank boost capital amid the worst financial crisis since the Great Depression.
The fund converted preferred securities of Citigroup that it purchased for $3 billion last year into common shares and sold them, making a profit of $1.1 billion, KIA said in an e- mailed statement today.
The transaction “will be a confidence-booster,” said M.R. Raghu, head of research at Kuwait Financial Center, a Kuwait- based investment bank, in a telephone interview. “It looks to be good news, making a profit in these times.”
Sovereign wealth funds are selling investments in financial stocks as they seek to reduce risk and address domestic criticism over investment priorities. The funds, fueled in part by oil revenue, had become sources of capital around the world for companies including Citigroup and Morgan Stanley, helping them to withstand the credit market seizure that followed the collapse of U.S. subprime mortgages.
Singapore’s Temasek Holdings Pte, KIA and China Investment Corp. are among the sovereign funds that helped U.S. investment banks replenish more than $200 billion of capital. KIA and Temasek owned shares in Merrill Lynch & Co., which was bought by Bank of America in 2008 after the shares slumped 35 percent.
Alwaleed Stake
Saudi Arabia’s Prince Alwaleed bin Talal remains a shareholder in New York-based Citigroup, even after an 88 percent drop in its stock price during the past two years. Alwaleed has been among the company’s top shareholders since the early 1990s, when he helped rescue it from near-collapse. He said Dec. 1 that he expects 2010 to be a year of “stabilization” for the bank.
Barclays Plc, Britain’s second-biggest bank, avoided a government bailout in part by selling 5.3 billion pounds ($8.7 billion) of stock and convertible notes to the Qatar and Abu Dhabi sovereign wealth funds. The bank’s Abu Dhabi investors made a profit of 1.46 billion pounds when they sold shares in the lender in June.
Sovereign funds, together valued at about $3.2 trillion, operate as government-owned, special purpose investment vehicles.”
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