Word: citigroup
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...Nonetheless, the deal will be costly for Citi. In order to exit TARP, the bank will have to sell $20.5 billion in new shares. Analysts estimate the stock sale will lower the company's earnings per share by about 20%. "One of the basic problems for [Citigroup's] valuation is that it has too many shares as a result of its many rounds of capital raising and exchange offers," says analyst David Hensler, who follows Citi for research firm Creditsights...
...research firm Institutional Risk Analytics, thinks the problem with Citi's repayment has less to do with capital ratios and more to do with waning confidence in the bank around the world. In early December, the investment arm of the government of Kuwait sold its entire investment stake in Citigroup. "Foreign investors like to see the government's stake in Citi," says Whalen. "If the government gets out, investors around the world will flee...
...TARP, Bank of America was required to raise $18.5 billion in new capital, or about 40% of the $45 billion in capital it repaid the government. Other banks have had to raise as much as half of the amount they want to pay back the government in new capital. Citigroup, though, is required to raise more than 100% of what it wants to pay back - $20.5 billion in new capital, half a billion dollars more than it will pay Uncle Sam. That suggests the government is still worried that Citi has significant losses on its books and needs to hold...
Perhaps Citi should have slept on Dubai. A year and a half ago, Citigroup became the first U.S. bank to relocate one of its rising stars, Alberto Verme, an investment banking executive, to the booming gulf state. At the time, Citi CEO Vikram Pandit said the move was a sign that the bank was "convinced of the region's long-term and immense growth opportunities...
...Obviously, this is not a positive for Pandit," says Michael Holland, a money manager and the former chairman of Salomon Brothers Asset Management, which was acquired by Citigroup. "Being big everywhere is the business model he has chosen. That means when there are losses anywhere you are going to get hit." Things were booming there back in 2008 when Citi sent Verme to the gulf state - from 2004 through 2008 Citi's revenues from the region grew at a 30% average annual rate. He had run the bank's Latin American operations before being promoted to co-head of investment...