Citigroup Inc.'s chief executive Vikram Pandit tried to rally the troops Friday morning even as his bank's stock sunk to new lows on the New York Stock Exchange. In a morning conference call, Pandit said that the bank wouldn't sell its Smith Barney brokerage unit, while blaming the bank's troubles on rumor mongering and short sellers, according to multiple
press reports of the confidential call.
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CNBC is reporting that senior officials at Citi told it that a
strategic change in the firm's direction is in the works. Possible
moves include a merger or raising cash in the immediate
future.
Among the rumored merger partners for the banking giant are Morgan
Stanley, Goldman, Sachs & Co. and State Street Bank. Still
convincing another bank to pair up with Citi could be a problem, since
investors have been savaging the stock as they suspect that Citi's
balance sheet holds plenty more toxic assets that will have to be
written down. But on the other hand, all of Citi's peers and the
government are likely terrified by what a failure by the banking giant
would entail.
With its shares now below $4.00 per share,
selling by asset managers, pension funds and endowments with internal standards that disallow holding stocks with a value of less than $5 could quickly imperil the entire bank.
Should Citi's position continue to deteriorate, we could
see government intervention as soon as this weekend, either through a
seizure of the bank or with the Fed and Treasury engineering a sale,
where taxpayers take on some of the risk from Citi's assets. -
George
White
See CNBC story
See Dealscape post on Citi/pension funds
