Citigroup Falls to Lowest Since Bank Formed in 1998 (Update2)
By Josh Fineman
July 15 (Bloomberg) -- Citigroup Inc., the biggest U.S. bank, fell to the lowest level in New York trading since former Chairman and Chief Executive Officer Sanford Weill created the company through a merger in October 1998.
Citigroup, which lost half its value on the New York Stock Exchange this year as the mortgage market collapsed, dropped 4.3 percent to $14.56 today on concern earnings prospects won't rebound in coming quarters.
The price was the lowest since Oct. 8, 1998, the day the New York-based bank was formed through the $36 billion combination of Travelers Group Inc. and Citicorp.
``The company has destroyed a lot of wealth, but Sandy Weill had a lot to do with that,'' said William Fitzpatrick, an equity analyst at Optique Capital Management Inc. in Milwaukee, Wisconsin, which manages $1.4 billion. ``He's the one who built this big monster. Clearly the company was too big.''
Vikram Pandit, who took over from Weill's successor, Charles O. Prince, in December, is lowering costs and shedding assets after the bank reported two straight quarterly losses totaling a record $15 billion. Citigroup has booked more than $40 billion of credit losses and writedowns during the global credit-market contraction that began last year, more than any other financial institution.
Weill, 75, fused together an investment bank, commercial bank, insurer, asset-management firm and consumer-finance business into a company that now has more than 300,000 employees, offices in more than 100 countries and more than $2 trillion of assets. Profit climbed to $17.9 billion in 2003, the year he left, triple the amount in 1998.
Earnings Prospects
Citigroup Chief Financial Officer Gary Crittenden said it may take two to three years for the bank's returns to ``significantly'' improve, the New York Times reported today.
The shares have dropped about 75 percent since reaching a record $56.41 in December 2006.
Citigroup spokeswoman Shannon Bell declined to comment. Weill was unavailable to comment, said Mike Conway, his chief of staff.
Citigroup's performance under Prince didn't match what investors came to expect from Weill, who demanded 15 percent annual profit increases during his 17 years as CEO of Citigroup, Travelers and their predecessors. Powered by a series of blockbuster deals, climaxing with Travelers' acquisition of Citicorp, Weill delivered a 160 percent stock gain during his last five years as CEO.
Asset Growth
Under Prince, Citigroup's assets increased by $689 billion from 2005 through 2007, an amount larger than the entire balance sheet of Wells Fargo & Co., the fifth-biggest U.S. bank. Prince, 58, was forced to resign last November as the bank headed for a record fourth-quarter loss of almost $10 billion.
Pandit, 51, said in May that Citigroup will get rid of about $400 billion in assets over the next three years as he begins to whittle away at the company built by Weill.
Citigroup will shed ``legacy assets,'' including real estate holdings and collateralized debt obligations, such as bonds backed by pools of subprime mortgages, Pandit said.
Citigroup last week agreed to sell its German consumer unit to France's Credit Mutuel Group for 4.9 billion euros ($7.7 billion). The company has also said it will sell employee-benefit joint venture CitiStreet LLC, and in April it agreed to sell the Diners Club International credit-card payment network and CitiCapital, a provider of leases and financing for industries including health care and construction.
Job Cuts
The bank has disclosed plans to eliminate about 14,000 jobs during the past year, according to data compiled by Bloomberg. UBS AG, Lehman Brothers Holdings Inc. and Merrill Lynch & Co. are among competitors that have announced more than 5,000 job cuts.
Pandit has raised $44 billion in capital through stock sales and private offerings to investment funds controlled by foreign governments including Abu Dhabi.
Citigroup also plans to cut $15 billion in costs in the next two to three years, while targeting revenue growth of 9 percent, Pandit said.
The bank slashed the quarterly dividend by 41 percent in January to 32 cents a share, the first drop since the early 1990s. Analysts including Oppenheimer & Co.'s Meredith Whitney have said the bank may have to cut the dividend again to bolster capital as losses escalate.
To contact the reporter on this story: Josh Fineman in New York at jfineman@bloomberg.net.
Last Updated: July 15, 2008 16:14 EDT
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