Citigroup Inc. delivered a belated Christmas gift of $800 million in new capital for its South Korean banking arm on Monday. The generous capital infusion is not what Citigroup needs to be taking on right now with its shaky financial situation, but the move might be a necessity to stave off its weakening South Korean arm as regional Asian banks, in general, are slumping as a result of the global economic downturn.
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Citi told Reuters that 60% of the funds will be used to issue new shares and the remaining 40% will be used for subordinated debt. Both the shares and new debt will be acquired by Citigroup. "Citigroup's investment this time will further strengthen our
capital position, making us the strongest bank in terms of capital
base," Citibank Korea CEO YK Ha said in a statement.
This Citigroup investment could not have come at a worse time for the bank, which is trying to get its financial house in order. The bank is working to restructure by cutting costs with layoffs as well as raise more cash via divesting units, such as its Citi Technology Services Ltd. to Wipro Technologies for $127 million last week. Meanwhile, Citi's stock has been slumping in 2008, reflective of its financial woes, with it currently trading in the $6 range. - Gerald Magpily
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Comments
Yes, just what the TARP and other Government rescue funds were intended for !!!! Pump up a failing overseas subsidiary but don't open the flow of credit here in the U.S.
Citi is in a death spiral and Pandit thinks he is a world class banker, soooooooo sad !!!