Citigroup floundering in attempt to arrest record decline

Citigroup, once the world's biggest banking group, saw another $5bn wiped off its value yesterday after an emergency board meeting failed to come up with any initiative to stem the unprecedented flight of investors. Shares fell to $3 (£2) after the bank's chief executive ruled out selling its retail stockbroking arm, Smith Barney, in a bid to stop the rout.

Shares in Citigroup have lost more than half of their value this week since Vikram Pandit, the chief executive, announced plans on Monday to sack 52,000 workers. The bank and its biggest investors have tried in vain to reverse the record decline, but nothing has worked.

Pandit called an emergency meeting with staff at 8am in New York today ahead of a full board meeting to confront the group's collapsing share price.

The board wants Citi to consider a break-up, merger with another company or a fire sale of assets and divisions in order to shore up its collapsing share price. Pandit is understood to have told his closest lieutenants that "everything is on the table".

It is understood that teams of executives within Citigroup had already begun drawing up plans for the emergency sale of the Smith Barney retail brokerage, the global credit card division and the transaction services unit.

The share price rose sharply but briefly as rumours about the emergency plans leaked into the market before the opening bell. But, within minutes, it emerged that Pandit told staff he was opposed to a break up of the company and had no plans to sell Smith Barney.

The conflicting reports added to the confusion and fear already stalking the market and sparked a further steep selloff in Citigroup shares as the market opened.

Striking a deal to sell all of Citigroup would be fraught with problems. The banking group is huge, spanning the globe with more than 350,000 employees.

Morgan Stanley, the former Wall Street brokerage that recently became a commercial bank, held preliminary merger talks with Citi in September when its own share price was under pressure. Pandit spent much of his career at Morgan and is close to John Mack, the Morgan chief executive. Sources said talks have not yet been rekindled, however.

A source close to Mack said the bank had no interest in doing a deal with Citi: "We talked in September when we had our own problems, but we found a way to solve those problems on our own and have no need to do a deal with anyone right now."

Analysts also pointed to the possibility of a deal with Goldman Sachs, but there has been no contact between the two companies at this stage.

The morning meeting was called on Thursday night after Citi's shares lost more than 26% of their value in a single session on Wall Street. The steep price drop – which left the bank with a market value of just $25bn – followed eight sessions of relentless share price declines for Citi.

Officially the bank is sticking to the corporate mantra that nothing is wrong. "Citi has a very strong capital and liquidity position," a spokesman said, adding that the bank was "focused on executing our strategy".

Citi's strategy already includes selling off divisions and axing tens of thousands of jobs. On Monday, Pandit announced a plan to get rid of up to 52,000 more employees in an effort to cut costs and arrest the bank's sinking share price.

But neither plan has managed to restore confidence to investors who are fleeing Citi stock as fast as they can.

Saudi Arabian prince Alwaleed Bin Talal, Citi's biggest investor, is the notable exception. On Thursday, he announced a plan to invest $349m in the bank to boost his shareholding from 4% to 5%. The bank hoped such a vote of confidence would stop the sell off, but that failed, too.

Citigroup's share price has been in decline for much of the past two years. In 2006, the bank was worth about $250bn and the shares were priced at about $54 each.

But the rapid and steep decline of the past two months was sparked by fears that the group might not have the means to recover from the billions of dollars of losses it incurred dealing in sub-prime mortgage backed debt and from mounting consumer loan defaults.

The bank has posted losses of more than $20bn in the past four quarters and was forced to take $25bn of US government aid earlier this month to prop up its ailing balance sheet.

Citi has become a lightning rod for market fears about the US banking sector as a whole.

With the aftermath of the sub-prime crisis and the credit crunch still crippling day-to-day banking business at every level, there is little to no confidence in the market that any banking group is viable.

Citi also blames so called short sellers for its plunging share price and is calling on politicians in Washington to reintroduce curbs on the practice as a measure to help stop its decline. Short sellers bet on share prices going down rather than up and it is said that the pressure from a large number of them can push a stock into an unstoppable downward spiral.

Citi's share price closed at $4.71 on Thursday evening. If the company is unable to bring it back above $5 before the end of the year, big mutual funds and other institutional investors will be forced to sell their entire holdings as rules prohibit them from investing client funds in such cheap stocks.

If such a forced sale occurs, Citi faces the probability of complete share price collapse.

Citigroup floundering in attempt to arrest record decline

Citigroup, once the world's biggest banking group, saw another $5bn wiped off its value yesterday after an emergency board meeting failed to come up with any initiative to stem the unprecedented flight of investors. Shares fell to $3 (£2) after the bank's chief executive ruled out selling its retail stockbroking arm, Smith Barney, in a bid to stop the rout.

Shares in Citigroup have lost more than half of their value this week since Vikram Pandit, the chief executive, announced plans on Monday to sack 52,000 workers. The bank and its biggest investors have tried in vain to reverse the record decline, but nothing has worked.

Pandit called an emergency meeting with staff at 8am in New York today ahead of a full board meeting to confront the group's collapsing share price.

The board wants Citi to consider a break-up, merger with another company or a fire sale of assets and divisions in order to shore up its collapsing share price. Pandit is understood to have told his closest lieutenants that "everything is on the table".

It is understood that teams of executives within Citigroup had already begun drawing up plans for the emergency sale of the Smith Barney retail brokerage, the global credit card division and the transaction services unit.

The share price rose sharply but briefly as rumours about the emergency plans leaked into the market before the opening bell. But, within minutes, it emerged that Pandit told staff he was opposed to a break up of the company and had no plans to sell Smith Barney.

The conflicting reports added to the confusion and fear already stalking the market and sparked a further steep selloff in Citigroup shares as the market opened.

Striking a deal to sell all of Citigroup would be fraught with problems. The banking group is huge, spanning the globe with more than 350,000 employees.

Morgan Stanley, the former Wall Street brokerage that recently became a commercial bank, held preliminary merger talks with Citi in September when its own share price was under pressure. Pandit spent much of his career at Morgan and is close to John Mack, the Morgan chief executive. Sources said talks have not yet been rekindled, however.

A source close to Mack said the bank had no interest in doing a deal with Citi: "We talked in September when we had our own problems, but we found a way to solve those problems on our own and have no need to do a deal with anyone right now."

Analysts also pointed to the possibility of a deal with Goldman Sachs, but there has been no contact between the two companies at this stage.

The morning meeting was called on Thursday night after Citi's shares lost more than 26% of their value in a single session on Wall Street. The steep price drop – which left the bank with a market value of just $25bn – followed eight sessions of relentless share price declines for Citi.

Officially the bank is sticking to the corporate mantra that nothing is wrong. "Citi has a very strong capital and liquidity position," a spokesman said, adding that the bank was "focused on executing our strategy".

Citi's strategy already includes selling off divisions and axing tens of thousands of jobs. On Monday, Pandit announced a plan to get rid of up to 52,000 more employees in an effort to cut costs and arrest the bank's sinking share price.

But neither plan has managed to restore confidence to investors who are fleeing Citi stock as fast as they can.

Saudi Arabian prince Alwaleed Bin Talal, Citi's biggest investor, is the notable exception. On Thursday, he announced a plan to invest $349m in the bank to boost his shareholding from 4% to 5%. The bank hoped such a vote of confidence would stop the sell off, but that failed, too.

Citigroup's share price has been in decline for much of the past two years. In 2006, the bank was worth about $250bn and the shares were priced at about $54 each.

But the rapid and steep decline of the past two months was sparked by fears that the group might not have the means to recover from the billions of dollars of losses it incurred dealing in sub-prime mortgage backed debt and from mounting consumer loan defaults.

The bank has posted losses of more than $20bn in the past four quarters and was forced to take $25bn of US government aid earlier this month to prop up its ailing balance sheet.

Citi has become a lightning rod for market fears about the US banking sector as a whole.

With the aftermath of the sub-prime crisis and the credit crunch still crippling day-to-day banking business at every level, there is little to no confidence in the market that any banking group is viable.

Citi also blames so called short sellers for its plunging share price and is calling on politicians in Washington to reintroduce curbs on the practice as a measure to help stop its decline. Short sellers bet on share prices going down rather than up and it is said that the pressure from a large number of them can push a stock into an unstoppable downward spiral.

Citi's share price closed at $4.71 on Thursday evening. If the company is unable to bring it back above $5 before the end of the year, big mutual funds and other institutional investors will be forced to sell their entire holdings as rules prohibit them from investing client funds in such cheap stocks.

If such a forced sale occurs, Citi faces the probability of complete share price collapse.