Citigroup launches counterattack to stabilise firm
Sunday, 23 November 2008, 20:30 IST
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Washington: Amid rumours about the impending departure of Vikram Pandit, the Indian-American CEO of Citigroup, the banking giant is reported to have launched a counterattack aimed at stabilising the company. While Citigroup executives and directors continue to wrestle with the question whether drastic changes are needed at the New York firm, its officials have been talking in recent days to Treasury Department and Federal Reserve officials, the Wall Street Journal reported Sunday. Citigroup hopes the government makes a public expression of confidence in Citigroup that would help reassure clients and customers, the leading financial daily said. "Absent a public endorsement, Citigroup executives believe even a small capital infusion from the government would send a positive signal." The New York Times noted: "Today, Citigroup, once the nation's largest and mightiest financial institution, has been brought to its knees by more than $65 billion in losses, write-downs for troubled assets and charges to account for future losses." Citigroup's stock has plummeted to its lowest price in more than a decade, closing Friday at $3.77. At that price the company is worth just $20.5 billion, down from $244 billion two years ago. Waves of layoffs have accompanied that slide, with about 75,000 jobs already gone or set to disappear from a workforce that numbered about 375,000 a year ago. Since becoming chief executive last December, Pandit, a former money manager and investment banker, has been scrambling to put out fires and repair Citigroup's deficient risk-management systems, the Times said. Pandit now "faces the twin challenge of rebuilding investor confidence while trying to fix the company's myriad problems". Citigroup has suffered four consecutive quarters of multibillion-dollar losses as it has written down billions of dollars of the mortgage-related assets it held on its books. Even though Citigroup executives insist that the bank can ride out its current difficulties, and that the repatriated assets pose no threat, investors have their doubts, the influential daily said. Because analysts do not have a complete grip on the quality of those assets, they are warning that Citigroup may have to set aside billions of dollars to guard against losses, it said. Some analysts say they believe that the $25 billion that the federal government invested in Citigroup in October might not be enough to stabilise it. Others say the fact that such huge amounts have yet to steady the bank is a reflection of the severe damage caused by Citigroup's appetites. "They pushed to get earnings, but in doing so, they took on more risk than they probably should have if they are going to be, in the end, a bank subject to regulatory controls," the Times quoted Roy Smith, a professor at the Stern School of Business at New York University, as saying. "Safe and soundness has to be no less important than growth and profits but that was subordinated by these guys," he added.
Source: IANS
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