Epicenter Of The Sell-Off: Citigroup
What’s the old tag line. The Citi never sleeps. Well the stock is certainly keeping investors up nights!
Citigroup lost more than one-quarter of its market value as new support from its largest individual investor failed to ease worries over whether it will have enough capital to withstand billions of dollars of potential losses.
Saudi Prince Alwaleed bin Talal said he plans to increase his stake in Citigroup, the No. 2 U.S. bank by assets, to 5 percent from less than 4 percent, calling its shares "dramatically undervalued."
Investors, however, were unimpressed, driving shares down below $5 on Thursday , a level not seen since 1994. Some investors and analysts questioned whether Citigroup would be able to handle billions of dollars in potential credit losses and write-downs in 2009 as the world economy sinks into recession.
The bank could face losses of $20 billion or more next year on loans in commercial real estate, emerging markets and credit cards, according to analysts.
"How much capital is Citi going to need?" asks Keith Davis, a bank analyst at Farr, Miller & Washington in Washington, D.C. "I don't think anyone knows, and so the knee-jerk reaction is to sell first and ask questions later."
Sandler O’Neill managing director Jeffrey Harte tells Fast Money he thinks Citigroup is too big too fail. “The government learned from Lehman Brothers that you can’t stick it to the credit markets or the system will collapse.”
However, he cautions investors about jumping into the common stock. “If it become necessary for the government to save Citigroup common shareholders will likely get wiped out,” he says.
Harte also says Citigroup may just be the poster child of the crisis. “Citigroup is among a handful of companies in great need of capital.”
Friedman Billings Ramsey says much the same. In fact Citigroup is just one of eight financial companies they’ve named as in need of further capital. The others are -- Morgan Stanley (MS), Goldman Sachs (GS), Wells Fargo (WFC), JPMorgan Chase (JPM), American International Group (AIG), Bank of America (BAC) and GE Financial,a division of General Electric (GE).
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Trader disclosure: On Nov.20, 2008, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders;Adami Owns (AGU), (BTU), (C), (GS), (INTC), (MSFT), (NUE); Karabell Owns (AAPL), (C), (CSCO), (GOOG), (JPM), (UYG); Najarian Owns (AXP) Put Spread; Najarian Owns (C) Puts; Najarian Owns (CVX) Put Spread; Najarian Owns (IYR) Puts; Najarian Owns (IYR) Puts; Najarian Owns (SCHW) And Is Short (SCHW) Calls; Macke Owns (SDS), (MSFT), (WMT), (UUP); Macke Is Short (YHOO)
Sandler O'Neill Advised Clients In Deals Involving (BAC) And (JPM)
Sandler O'Neill Recvd. Inv. Bank. Comp. From (BAC), (C) In Past 12 Mos.
Sandler O'Neill Expects To Receive or Seek Inv. Bank. Comp. From (BAC), (JPM), (C) In Next 3 Mos.
(BAC), (C), (JPM), (MER), (MS) Are Clients Of Sandler O'Neill
Sandler O'Neill Was A Manager Or Co-Manager Of A Public Offering for (C) In Past 12 Mos.
Sandler O'Neill Has Received Non-Inv. Bank. Comp. From (C), (JPM), (MER), (LEH), (BAC)
(GS) Is A Non-Inv. Bank. Client Of Sandler O'Neill
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