Fire sale at Citigroup
Citigroup announced another big loss, this time for $5.1 billion and announced it would fire another 9,000 employees. And yet the stock market went up. Apparently, analysts thought the losses would be even greater. But Citigroup is low on cash, and it's not clear how much more mortgage-backed securities the company will have to write off in the upcoming year.
How the mighty have fallen! According to a Bloomberg News article ("Citigroup's Market Value Drops Below Apple's Amid Credit Crisis", 4/12/09)
At the end of 2006, Citigroup Inc. was the fourth-largest company in the Standard & Poor's 500 Index, with a market value of $274 billion, almost four times that of Apple Inc. Now investors say the maker of iPods is worth $7.7 billion more than the biggest financial services provider.
To bolster its position, Citigroup has been selling off assets.
- It sold most of its North American commercial lending and leasing unit to General Electric's GE Capital Solutions in a $13.4 billion deal.
- It sold its Diners Club credit card operation to Discover for $165 million. The now little-used credit card was the first independent credit card company when it was founded in 1950. It will fetch just a rounding error, but every little bit helps.
- It sold off the retirement plan of Powell Duffryn Plc, a British engineering firm to pension insurer Paternoster for $788 million.
- It is also in negotiations to sell off $12 billion of junk-grade loans to private equity groups Apollo Management, the Blackstone Group, and TPG Inc.
- The general rumor is that the company may have to sell off its Smith Barney brokerage operation.
The carefully built empire of Sandy Weill is sinking, and it's throwing excess cargo overboard in order to keep afloat.
