The banking industry, a source of pain for the markets since the credit crunch began, is center stage in today's trading. Citigroup shares this morning are getting whacked after Merrill Lynch slashed earnings estimates and said Citi could take another big writedown. Plus a sovereign wealth fund executive questioned whether the bank will find enough capital.
Fed officials, meanwhile, are making important comments on the banking industry, beginning with Fed Chairman Ben Bernanke who speaks before independent bankers at a convention in Orlando. Bernanke speaks at 9:05 am EST on mortgage foreclosures.
But traders say perhaps more market moving could be comments from Fed Vice Chairman Donald Kohn when he appears before a Senate banking committee hearing on the condition of the banking system at 10 am EST The hearing will be heavily attended by banking regulators.
Comments from a Dubai owned investment firm executive have traders buzzing this morning. Sameer Al Ansari, CEO of Dubai International Capital, was quoted by wire services as telling delegates at a conference in Dubai that investments by Abu Dhabi investment Authority and Saudi Prince Alwaleed bin Talal may not be enough to save Citi if it does not find fresh capital.
Merrill's Guy Moszkowski, meanwhile, slashed Citi earnings today. He said Citi could earn $0.24 per share for the year and lose $1.66 per share for the first quarter, compared to his previous estimate of $2.74 per share for the year and $0.55 per share for the quarter.
Citi, he says, may report a $15 billion writedown from subprime CDO exposure and another $3 billion from commercial real estate, leveraged lending and consumer lending provisions. He maintained a neutral rating on the stock.
The Abu Dhabi Investment Authority bought a 4.9 percent stake in Citi last year. Kuwait Investment Authority said it would invest $3 billion in Citi.