Losing $100 Million a Day

The Wall Street Journal reports that traders at Citigroup lost over $100 million a day on 15 separate occasions last year.

“I think that the managements of many of the financial institutions simply didn’t have a clue of what was going on,” James D. Wolfensohn, a former World Bank president who now holds the title of “senior adviser” at Citigroup, said Sunday evening at a public event in Manhattan.
Mr. Wolfensohn said in an interview yesterday he was referring generally to Wall Street firms, not to Citigroup in particular.
Citigroup’s latest disclosures come as analysts and investors are clamoring for Vikram Pandit, Citigroup’s new chief executive, to unveil his widely anticipated turnaround plan. Mr. Pandit has been mum, but tonight he is hosting 15 to 20 Wall Street analysts in a private “meet and greet” cocktail hour at Citigroup headquarters. The gathering has irked some investors, who weren’t invited and who note that Citigroup hasn’t yet scheduled a public investor day since Mr. Pandit took over.
After sifting through the annual report, Oppenheimer analyst Meredith Whitney slashed her 2008 earnings estimate on Citigroup by more than 70% to 75 cents a share, cautioning that even the lowered projection “could still prove optimistic.” She said the bank’s suffering share price could fall below $16 — or to about 70% of its book value. That level was last seen “during the last credit cycle of 1990-1991,” she added.

This seems to be a classic case of not knowing what you don’t know. Citigroup’s last annual report acknowledged that it’s holding about $20 billion worth of securities that are tied directly or indirectly to global real estate. That’s all it says. No details or nothing.
The company’s book value is $22.74 a share. Last May, the stock was going for over $55 a share.

Posted by on February 26th, 2008 at 9:49 am


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