Excerpt 1
Citigroup will have to sell more of its assets to stay in business, well-known banking analyst Meredith Whitney told CNBC Tuesday.
Whitney made her comment after being asked about Citi's Chief Executive Vikram Pandit saying he was confident about the troubled bank's survival prospects.
 |
Meredith Whitney |
"Citi's capital position is stronger relative to how it was," said Whitney. "But I wouldn’t call it strong."
Whitney, who is founder of Meredith Whitney Advisors, said that the bank has exposures across the board and said that "I'm not optimistic about them."
"Trillions of dollars of loans have been mispriced by Citi", said Whitney. "By my math, they don’t make money in any of their businesses."
Whitney says Citigroup [C 1.45 
0.40 (+38.1%) 
] will be forced to sell their "crown jewels" if they are going to get any more bailout money from the government. "They're going to have a 'yard sale.' They will be a smaller and less of an international business going forward," says Whitney.
Citi split off its prized Smith Barney brokerage on Janury 13th.
Since October of last year, Citigroup has received two federal bailouts, $45 billion of capital from the Treasury Department's Troubled Asset Relief Program, and a government agreement to cap losses on $300.8 billion of troubled assets.
On the topic of keeping mark-to-market rules, Whitney said that it's basically a non-factor and that the damage has already been done. Whitney says that the banks don't want to have it suspended because if for some reason, the market comes back "they don’t get the benefit of the newer market."
Whitney also said that the government is trying to sweeten deals for the private sector in order to get more cash infusions into U.S. banks. "The government cannot do it alone," said Whitney. "They need the private sector to come back."
Whitney also commented on the credit card crisis she's been predicting. She said that credit cards are the next credit crunch and said that banks' portfolios continue to shrink and when you shrink the portfolios for the banks, "credit losses eat into earnings and they have to peddle faster to collect on loans and they make less money and lose money."
Whitney revised her estimate for credit card line cuts to more than $2 trillion inside of 2009 and $2.7 trillion by end of 2010.
Whitney has previously said the credit line cuts would be $2 trillion by the end of 2010.ttle
Bank Debt Stressed at Bear Stearns, Lehman Peaks
By John Glover
March 10 (Bloomberg) -- Bank debt is as stressed as when Bear Stearns Cos. had to be bailed out and Lehman Brothers Holdings Inc. collapsed, according to analysts at BNP Paribas SA.
The CHART OF THE DAY shows contracts on the Markit iTraxx Financial index of credit-default swaps linked to the senior debt of 25 banks and insurers were more expensive today than the Markit iTraxx Europe corporate index. That hasn’t happened since Lehman went bankrupt in September and, before that, JPMorgan Chase & Co.’s takeover of Bear Stearns and it reflects “systemic stress” in the financial system, according to BNP Paribas.
“We’re seeing the start of the next leg of the crisis and that’s going to be financial bondholders taking a haircut as lenders default,” said Mehernosh Engineer, a London-based strategist at BNP Paribas. “There’s been a perception that banks’ senior bondholders are untouchable but that’s going to change.”
Bondholders take a haircut in a restructuring when they agree to a reduction in the par value of their securities. Indexes gauging the performance of bank bonds have signaled deteriorating prospects for the securities this year as lenders grapple with $1.2 trillion of writedowns and losses, and the threat of nationalization.
The crossing of the financial and corporate indexes “is clearly not a healthy sign,” according to Engineer. Solvency concerns mean that the distortion may continue, “a fact being reflected in cash bonds over the past month,” he said.
The extra yield investors demand to hold the lowest-rated bank bonds rather than government notes has gained more than 10 percentage points to a record 34.56 percentage points since the end of January, according to Merrill Lynch & Co.’s Euro Sub-Debt Tier 1 Index. A similar gauge of financial companies’ broader debt is at 578 basis points from 474 at end-January.
Excerpt 2
Citigroup Will Have To Sell More Assets: Whitney
Citigroup will have to sell more of its assets to stay in business, well-known banking analyst Meredith Whitney told CNBC Tuesday.
Whitney made her comment after being asked about Citi's Chief Executive Vikram Pandit saying he was confident about the troubled bank's survival prospects.
|
Meredith Whitney |
"Citi's capital position is stronger relative to how it was," said Whitney. "But I wouldn’t call it strong."
Whitney, who is founder of Meredith Whitney Advisors, said that the bank has exposures across the board and said that "I'm not optimistic about them."
"Trillions of dollars of loans have been mispriced by Citi", said Whitney. "By my math, they don’t make money in any of their businesses."
Whitney says Citigroup [C 1.45 0.40 (+38.1%) ] will be forced to sell their "crown jewels" if they are going to get any more bailout money from the government. "They're going to have a 'yard sale.' They will be a smaller and less of an international business going forward," says Whitney.
Citi split off its prized Smith Barney brokerage on Janury 13th.
Since October of last year, Citigroup has received two federal bailouts, $45 billion of capital from the Treasury Department's Troubled Asset Relief Program, and a government agreement to cap losses on $300.8 billion of troubled assets.
On the topic of keeping mark-to-market rules, Whitney said that it's basically a non-factor and that the damage has already been done. Whitney says that the banks don't want to have it suspended because if for some reason, the market comes back "they don’t get the benefit of the newer market."
Whitney also said that the government is trying to sweeten deals for the private sector in order to get more cash infusions into U.S. banks. "The government cannot do it alone," said Whitney. "They need the private sector to come back."
Whitney also commented on the credit card crisis she's been predicting. She said that credit cards are the next credit crunch and said that banks' portfolios continue to shrink and when you shrink the portfolios for the banks, "credit losses eat into earnings and they have to peddle faster to collect on loans and they make less money and lose money."
Whitney revised her estimate for credit card line cuts to more than $2 trillion inside of 2009 and $2.7 trillion by end of 2010.
Whitney has previously said the credit line cuts would be $2 trillion by the end of 2010.
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