C is a real conundrum. The company says they are looking for a deal, then they come out and say that SB is not for sale. Pandit is clueless. I think the stock is getting hammered in reaction to Pandit's purchase a few days ago.
The only good thing to come out of a deal with C is that the company that buys them will be able to writedown all of C's bad assets. C is the weakest of all of the Fortress banks due to all of the leverage on their balance sheet.
This kind of takes us back to the WB situation. They were purchased at a modest premium to the C offer. Now, the hunter becomes the hunted. I just wonder what kind of marks that a partner would make. If WFC wrote down $60 billion of assets for WB, the marks for C would easily exceed $100 billion in goodwill writedowns.
The end of Citibank would be the end to one of the country's worst run institutions. F, GM, C, AIG, BSC, LEH, FNM, FRE, WB, WM. Since there is no immediate problems at C, the deal could probably be priced at a decent premium. The question is who wants to buy them - MS and GS are the only 2 companies that really need to make a deal. JPM could buy them, but it would be so redundant that it wouldn't make a whole lot of sense. My guess is GS is the one company that needs to stage the biggest move to make the transition to a commercial bank. I don't think that MS has the balance sheet to make such a large transaction.
It will be very interesting to see how the deal works out. GS and C might be a big positive for the market going into the end of the year. |
