Will Citigroup Collapse?

23:01 Thu 20 Nov 2008. Updated: 17:14 28 Jan 2009
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I didn’t realize they were still in such significant trouble, but BusinessWeek reports they’re on the rocks. I’m not shedding too many tears for them, but a number of the figures cited in this article make for worrying reading. (Foremost being, if you’re a Citigroup investor, the 66% drop in their share price in November…)

Two weeks ago they got $25 billion from the US government, and that might not be enough. Incidentally, that seems to be the same amount of money that the Big Three automakers were asking Congress for—and not getting. I don’t care for the US automakers, but I’d give them that money in a heartbeat over Citigroup or any of the banks, as they employ a lot more people and they actually produce tangible things.

Citigroup are planning to axe 52000 employees, not an insignificant number.

Payments more than three months late in Citigroup’s consumer mortgage division in Q3 2008 is 3.85%, up from 1.76% in Q3 2007, and it’s hard to see that number doing anything but going up. Furthermore, it’s not a good sign for the larger economy. Apparently their auto financing is in similar trouble.

The article makes the claim that Citi’s capital/risk ratio is frightening at $2.58 of risk for each $1 of capital, but that seems like a weird number—how do they know that, when the same article points out that nobody seems to know what’s going on in Citi’s derivatives division?

Citi is lobbying the White House to again ban the short selling of financials, which seems pretty ridiculous to me, but they might get their wish. The article ends on this reassuring note:

“We’re getting to the critical doomsday question: What happens when a megabank like Citi fails,” says Weiss. He says the bank is “on the razor’s edge. The biggest banks are not just important to the banking system, they are the banking system. All this starts to get into the neverland of uncertainty. No one really knows what happens next.”
“Citigroup’s Worries Mount”, Der Hovanesian, BusinessWeek, 20 Nov 2008

2 Responses to “Will Citigroup Collapse?”

  1. iain fleming Says:

    i am hoping and praying that citi falls and completely closes down,dead etc so on.they have destroyed my marriage and are trying to take my house.through there own incompetence down right arrgance.i can only wish ill on the the so called company -I have never felt so much anger towards any company ever, so sooner the better and hope they burn in hell.

  2. Sammiah Says:

    I agree with Iain. Citigroup has been a irresponsible poorly managed corporation. The way they treat their customers is one step shy of Mafia style ‘La cosa nostra’ . The day they collapse I will buy a bottle of fine wine and I will pay cash.

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