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Citi Considers Asset Sales; Shares Off 20%
Ananlysts believe asset sales likely, bank failure not likely.
November 21, 2008
The freefall of Citigroup’s stock continues, forcing the bank's senior executives to consider alternatives, according to a story in The Wall Street Journal. While analysts who cover the stock do not expect the bank to fail, some say that an asset sale is a distinct possibility.
Shares of Citi were off another 20% Friday, now trading at $3.80, despite a late rally in the broader market. The Dow Jones Industrial Average was recently up 350 points.
“It would take a Depression every bit as large and long as the 1930s debacle to shake this company’s viability,” Ladenburg Thalmann analyst Richard Bove wrote in a research report Friday morning. “The current decline in the stock price is reflecting a series of fears related to loans and security values that cannot be actualized without a severe setback in the economy and a very rapid increase in interest rates.”
With that said, there is speculation that the bank could shed assets as a means to restore investor confidence. The Wall Street Journal's story even floated the possibility of an outright sale of the bank.
Analysts at Barclays Capital speculated in a research note that the bank, if it pursues that route, will have to make some difficult decisions about which assets to make available.
“We believe it may be difficult to sell asset intensive businesses in the current environment,” the analysts wrote, citing the investment bank or credit card business as divestiture possibilities. Barclays added that the company’s global transaction services unit, its Mexican franchise Banamex or its retail brokerage unit could potentially receive interest, though noted that sales of those divisions is likely “not desired” by the bank.
Saudi Prince Alwaleed bin Talal pledged on Thursday to increase his stake in Citigroup to 5%, but the move did little to slow the rout on the company’s shares.
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