Posted tagged ‘Citigroup’

Dow Plunges To 12-Year Low

February 23, 2009

Investors unable to extinguish their worries about a recession that has no end in sight lowered stocks again today.

The Dow  tumbled 251 points to its lowest close since Oct. 28, 1997.

From the Associated Press:

All the major indexes slid more than 3 percent. The Dow is just over 100 points from 7,000.

“People left and right are throwing in the towel,” said Keith Springer, president of Capital Financial Advisory Services.

Investors pounded most financial stocks even as government agencies led by the Treasury Department said they would launch a revamped bank rescue program this week. The plan includes the option of increasing government ownership in financial institutions without having to pour more taxpayer money into them.

Although the government has said it doesn’t want to nationalize banks, many investors are clearly still concerned that this could be a possibility as banks continue to suffer severe losses because of the recession. They’re also worried that banks’ losses will keep escalating as the recession sends more borrowers into default.

“The biggest thing I see here is the incredible pessimism,” Springer said. “The government is doing a lousy job of alleviating fears.”

The Treasury and other agencies issued a statement after The Wall Street Journal reported that Citigroup is in talks for the government to boost its stake in the bank to as much as 40 percent. Analysts said the market, which initially rose on the statement, wanted more details of the government’s plans.

“It’s only a very partial picture of what we may get,” said Quincy Krosby, chief investment strategist at The Hartford. “This proverbial lack of clarity is damaging market psychology.”

Meanwhile, technology stocks fell after The Journal reported that Yahoo Inc.’s new chief executive plans to reorganize the company. But the selling came across the market as pessimism about the recession and its toll on companies deepened.

“There’s no where to hide anymore,” said Jim Herrick, director of equity trading at Baird & Co.

Citibank Hardship Reaches the Consumer (Me)

November 25, 2008

How surprised was I last Friday to get a notice in the mail from my credit card company, Citibank, who was raising my APR to 15.99%. I have been a Citibank customer for ten years and just a few months ago, finally got my APR down to 9.99%.

I contacted Citibank to see about this change and was hoping to keep my APR at 9.99%.

Here is the response that I got:

The change proposed to your purchase APR was due to a reexamination of our policies was needed given the severe changes in the financial markets. Our costs in borrowing the money we use to lend have gone up significantly.

In addition we are seeing dramatically higher loan losses and delinquencies for many of our customers. We must manage to the dramatic changes we are seeing by changing some of our rates and fees in order to continue to provide you with products, benefits and services we have today.

More information on the proposed changes can be found online at http://www.federalreserve.gov.

Thank you for using our website.

Well thank you Citibank for explaining that YOUR financial problems are the reason that MY APR is going up. I’m so glad to be doing business with you.

For now, I will NO LONGER be using my credit card for any purchases, and as soon as I can transfer my balance to another company, you will lose a customer of ten years.

Economy Is Shrinking and Home Prices Continue to Drop

November 25, 2008

The economy shrank more than expected in the third quarter and home prices fell to levels not seen since early 2004 as the government announced new plans to provide $800 billion to boost consumer spending and home buying. Things keep looking bleaker and bleaker each day for the US economy. When will we hit rock bottom?

From the Associated Press:

Treasury Secretary Henry Paulson said key markets for consumer debt such as credit cards, auto and student loans essentially came to a halt in October, and that the new programs are aimed to get lending back to more normal levels.

Meanwhile, data released Tuesday provided further proof the country is almost certainly in the throes of a painful recession.

The Commerce Department’s updated reading on the economy’s performance showed gross domestic product shrank at a 0.5 percent annual rate in the July-September quarter, weaker than the 0.3 percent rate of decline first estimated a month ago, and the worst showing since the third quarter of 2001.

GDP measures the value of all goods and services produced within the U.S. and is considered the best barometer of the country’s economic fitness.

Meanwhile, the Standard & Poor’s/Case-Shiller national home price index released Tuesday tumbled a record 16.6 percent during the quarter from the same period a year ago. Prices are at levels not seen since the first quarter of 2004.

In an effort to increase the availability of home loans to borrowers, the Federal Reserve said it will purchase up to $100 billion in direct obligations from mortgage giants Fannie Mae and Freddie Mac as well as the Federal Home Loan Banks. The Fed also will purchase another $500 billion in mortgage-backed securities, pools of mortgages that are bundled together and sold to investors.

The $600 billion effort on mortgages came as the Fed also unveiled a new program to help unfreeze the market that backs consumer debt such as credit cards, auto and student loans.

Citigroup to Slash Up to 50,000 Jobs in 2009

November 17, 2008

Could they slash my credit card debt while they’re at it? Citigroup said this morning that it plans to cut more than 50,000 jobs in 2009. This is the latest move by the struggling bank to cut costs in order to survive the credit crisis plaguing the economy.

From CNN:

In an investor presentation on its Web site, the company said it would reduce its staff levels to approximately 300,000 employees. As of the end of September, the New York City-based bank had about 352,000 workers.

It was not clear however what parts of the company the cuts would come from or whether more could follow as the company described the cuts as a “near-term” target.

Last week, there was speculation that staffing reductions could come from the company’s investment banking and wealth management divisions.

Citigroup CEO Vikram Pandit, who was appointed last December, most likely addressed the job cuts in more detail at an employee town hall meeting held Monday morning.

The latest cuts are yet another example of how Citigroup is desperately trying to cut costs in the wake of the credit crisis.

Over the past four quarters, the New York City-based bank has trimmed its payroll by 23,000 workers and the company announced plans to sell off various divisions this past spring.

Citigroup, the nation’s second largest bank by assets behind JPMorgan Chase (JPM, Fortune 500), has been one of the hardest hit financial institutions during the credit crisis.

Over the last four quarters, the company has lost more than $20 billion, due in large part to its ill-timed bets on the U.S. housing market.

Government Considering Ownership in Banks

October 9, 2008

Hmmmm. This might not be a good thing. The Bush administration is considering taking ownership stakes in certain U.S. banks as an option for dealing with a severe global credit crisis.

From the Associated Press:

An administration official, who spoke on condition of anonymity because no decision has been made, said the $700 billion rescue package passed by Congress last week allows the Treasury Department to inject fresh capital into financial institutions and get ownership shares in return.

This official said all the new powers granted in the legislation were being considered as the administration seeks to deal with a serious credit crisis that has caused the biggest upheavals on Wall Street in seven decades and continues to roil global markets.

Supporters of this approach, such as Sen. Charles Schumer, D-N.Y., argue that injecting fresh capital into U.S. banks who want to participate in the program would be an effective way to bolster banks’ balance sheets and get them to resume lending. Taxpayers would benefit because the government would receive an equity stake in the bank in return for providing the capital.

“This idea would, at a minimum, complement the administration’s planned approach of buying up troubled assets and may prove to be the most promising tool of all in Secretary Paulson’s kit,” Schumer said in a statement.

A decision to inject capital directly into financial institutions in return for ownership stakes would be similar to a plan announced Wednesday by Britain.

Stocks Drop Sharply as Dow Jones Drops Below 10,000

October 6, 2008

The selling on Wall Street began at the opening bell on Monday and only intensified as the morning went on. Shares moves sharply lower as the banking crisis tightened its grip on the global economy.

The Dow Jones industrial average fell below 10,000 for the first time since 2004 after losing more than 500 points in the first hour of trading. The index has lost more than 1,100 points in the past two weeks and no end seems to be in sight. It appears that whoever wins the election one month from now, Barack Obama or John McCain, will have to step up and find a way to end this crisis.

From the Associated Press:

The markets have come to the sobering realization that the Bush administration’s $700 billion rescue plan won’t work quickly to unfreeze the credit markets, and that many banks are still having difficulty gaining access to cash. That’s caused investors to exit stocks and move money into the relative safety of government debt.

Over the weekend, governments across Europe rushed to prop up failing banks. The German government and financial industry agreed on a $68 billion bailout for commercial-property lender Hypo Real Estate Holding AG, while France’s BNP Paribas agreed to acquire a 75 percent stake in Fortis’s Belgium bank after a government rescue failed.

Wells Fargo Buys Wachovia

October 3, 2008

Just days after Citigroup announced the purchase of Wachovia for for $2.2 billion, Wells Fargo & Company announced today that it had reached an agreement to acquire the Wachovia Corporation for about $15.1 billion in stock.

From the New York Times:

The announcement came just four days after Citigroup had agreed to buy Wachovia’s banking operations of Wachovia for $2.2 billion of about $1 a share. But Wachovia, which is based in Charlotte, N.C., has now rejected that deal in favor of one where the entire company would be acquired. How Citigroup will respond to the news remained a question Friday morning.

In a statement, Wells Fargo, which is based in San Francisco, said that the deal required no assistance from the Federal Deposit Insurance Corporation or any other government agency.

The bank plans to raise up to $20 billion by issuing shares, primarily common stock.

Under terms of the agreement, which has been approved by directors of each company, Wachovia shareholders will receive 0.1991 shares of Wells Fargo stock in exchange for each share of Wachovia stock. The transaction, based on Wells Fargo’s closing stock price of $35.16 on Thursday, is valued at $7 a share. Wachovia has almost 2.2 billion common shares outstanding. The agreement requires the approval of Wachovia shareholders and regulators.

Citigroup Acquires Wachovia

September 29, 2008

Citigroup has agreed to acquire Wachovia‘s banking operations for approximately $2.1 billion in stock and will assume another $53 billion in Wachovia’s debt. The transaction is expected to close before year-end. It has been approved by the directors of both companies and is subject to Wachovia shareholder and regulatory approval.

From the Wall Street Journal:

Citi’s purchase of the fabled Charlotte bank marks another deal orchestrated by the federal government, this time by the Federal Deposit Insurance Corporation, and one in which the agency could be on the hook for loan losses.

“The FDIC has agreed to provide loss protection in connection with approximately $312 billion of mortgage-related and other Wachovia assets,” Citigroup said in a statement.

The Federal Reserve and Treasury Department were also part of the effort, another sign of how proactive the government has been in preventing ailing financial firms from failing and instead pushing for stronger firms to acquire some assets of the weaker companies.

Wachovia shares fell more than 90% in premarket trading, and the New York Stock Exchange did not open the shares for trading. Citigroup was off 1% at $19.95 shortly after the market opened.

The FDIC said the deal was reached in concurrence with it, the Federal Reserve Board and the U.S. Treasury Department. “There will be no interruption in services, and bank customers should expect business as usual,” FDIC Chairwoman Sheila Bair said.

In a separate statement, Fed Chairman Ben Bernanke said he welcomes the Wachovia bailout deal and supports the timely actions taken by the FDIC. He added that the FDIC action shows the government is committed to U.S. financial stability.

The FDIC sought to calm any concerns the Citigroup and Wachovia deal might have on financial markets.

From the Washington Post:

The purchase of Wachovia boosts Citigroup as a rival for Bank of America and J.P. Morgan Chase in the new coterie of financial behemoths that is emerging from the current financial crisis. Those three banks will now control almost a third of the nation’s deposits.

Citigroup, based in New York, also will become the largest bank in the Washington area. The company said it would raise $10 million in new capital to help it absorb Wachovia’s troubled loan portfolio. Citigroup also plans to cut the dividend on its shares, among the most widely held stocks in America.


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