The dark cloud that cast its shadow over the markets for the month of June continued to rain on investors as financial stocks took the brunt of the beating because of more write-downs, corporate restructurings and a slowing economy. Lehman Brothers Inc., Merrill Lynch & Co. and Citigroup Inc. negatively weighed on the markets as the Dow fell 121.24, or 1.04%, to 11,332.18 while the Nasdaq decreased 22.76, or .99%, to 2,298.43 in midday trading.
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Merill Lynch [MER] declined on a report from Lehman analyst Roger Freeman that that the New York-based investment bank would likely take a $5.4 billion write-down in the second quarter. Many analysts feel that a write-down of this magnitude will force Merrill Lynch to look for more capital on top of outside investments the company took in December and January. Merrill may likely be forced to sell assets in conjunction with raising a capital infusion to solidify its financial reserves.
Freeman's company Lehman [LEH] is also experiencing pains as it recently lost $3 billion and its top two executives, chief executive Richard Fuld and chief operating officer Bart McDade, said Friday they would abandon their bonuses. According to MarketWatch, Fuld reportedly received 98% of his $40 million compensation in the form of a bonus last year. The move certainly would save some money but would probably be a drop in the bucket to Lehman's exhorbitant need for cash.
Lastly, ailing Citigroup [C] reportedly may sell its back-office operation in India for an estimated $1 billion. The Economic Times says BPO, Citigroup Global Services, and the technology and infrastructure outsourcing arm, are on the auction block. Possible acquirers who are leading contenders for the assets reportedly are Capgemini and Tata Consultancy Services. - Gerald Magpily
