Wednesday, 19 November 2008

Citigroup shares tumble below $8 to 13-year low

NEW YORK (Reuters) - Citigroup Inc shares tumbled below $8 for the first time in 13 years on Tuesday amid concerns its plan to shed 52,000 jobs might not be enough to restore the banking giant to health or profitability soon.

"Investors have really turned sour," said Andrew Wilkinson, senior market analyst at Interactive Brokers Group in Greenwich, Connecticut. "No matter what steps management takes, whether it's layoffs or restructuring, investors do not like what they hear."

The bank's stock, part of the Dow Jones industrial average, closed down 53 cents, or 6 percent, at $8.36 after earlier falling to $7.89. The shares are down 39 percent this month, compared with a 22 percent drop in the KBW Bank Index, which includes the bank.

Spokeswoman Shannon Bell declined to comment on the stock move.

Tuesday's decline came a day after Chief Executive Vikram Pandit announced it will eliminate 15 percent of Citigroup's work force.

He told employees that Citigroup has spent the last year "getting fit," and raised $75 billion of capital, to prepare for a "difficult" 2009. "No part of this has been easy on anybody," he said.

Yet analysts expressed concern that the cutbacks, on top of 23,000 jobs already eliminated this year, may foreshadow deeper problems at the second-largest U.S. bank by assets.

"Both the near and long-term outlook for Citi remain unclear as it navigates the credit cycle and attempts to downsize its balance sheet and reposition the franchise," wrote Sanford C. Bernstein & Co analyst John McDonald. "We see no profitability for the next several quarters." He cut his share price target to $11 from $20.

Citigroup has lost $20.3 billion in the last year.

The bank offered few specifics on the cuts, saying they will be global and affect a wide array of business lines.

About one-half of the 52,000 jobs will be cut through asset sales, and one-half through layoffs and attrition. The reductions would reduce Citigroup's work force to 2005 levels. Pandit hopes to reduce operating expenses by 20 percent.

Analysts said the cuts come amid deterioration in consumer credit as economies worldwide appear headed for recession. Citigroup operates in more than 100 countries.

"The earnings picture is likely to be tough until there are signs of a stabilization in consumer credit quality, which at this point appears unlikely until at least the back half of 2009," CreditSights Inc analyst David Hendler wrote.

McDonald said Citigroup's quarterly consumer credit losses could rise to $6.6 billion in early 2009 from $4.6 billion in the third quarter. He also said Citigroup's plan to move many risky assets onto its books from its trading portfolio should lower earnings volatility, but could lead to a $3.5 billion fourth-quarter write-down tied to the transfer.

Citigroup shares have fallen nearly 72 percent this year. The company's market value is about $45.6 billion, down from more than $270 billion in late 2006.

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