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Has Citigroup stablized with a Tier 1 of 8.2 percent?
Citigroup's Tier-1 capital ratio, a measure of its ability to cover losses, was 8.2 percent as of September 30, 2008. 6 percent is considered adequate.
Citigroup has raise more $40 billion in capital from investors
Citigroup is looking to sell $400 billion in assets to strengthen the bank’s balance sheet.
Is Citigroup becoming more stable and building confidence?
Citigroup has raise more $40 billion in capital from investors
Citigroup is looking to sell $400 billion in assets to strengthen the bank’s balance sheet.
Is Citigroup becoming more stable and building confidence?
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The raising of capital and a good Tier-1 ratio are only part of what any bank needs to be "stable"... The MOST important thing is the steps the company takes in the future and HOW they deal with the capital and ratio that they now hold.
is Citigroup on the right path? of course
Has Citigroup stablized? it is too early to tell
is Citigroup on the right path? of course
Has Citigroup stablized? it is too early to tell
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Working at one of the top 5 largest banks in the country
Working at one of the top 5 largest banks in the country
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Steps:
1. Reduce debt by selling off assets.
2. Writing down 20 percent of $2.05 trillion dollar assets
3. Firing thousands of employees.
4. Paying more money for premiums on its credit default swaps
Citigroup has identified risk in its emerging markets: Brazil, India, and Mexico. Citigroup has large investments in these emerging markets.
Revenues have declined. As of Feb 2009, Citigroup recorded it fourth straight quarter of losses and $13 billion in writedowns and credit losses. Revenue fell 23 percent to $16.68 billion. Expenses total $14.43 billion, up 2 percent.
1. A creditor (party A) purchases a bond from GM forming debt contract. GM pays a yield percentage for usage of the money. GM invests the debt to finance R&D and growth. The Creditor (Party A) hedges against the risk of defaults and purchases credit or loan default swaps from Citigroup (the bank, Party B) and makes premium payments to the bank. The creditor (Party a) is transferring risk to the bank and paying premium for the bank to bear the risk. When GM defaults the creditor sells the bond at face value and the bank (Party B) pays the lost difference on the Bond to the creditor (Party A). If GM default the bank (Party B) could pay up to $44 billion in bond loses, as a maximum payout, a gross notional amount. The premium costs for the CDS adjusts to the perceived risk of default and has increased 80 percent. $8 million to insure $10 million of debt for five years. GM must fight bankruptcy.
2. Money is gone from banking and investing. Money is waiting in vaults and creditors waiting to see what will happen with GM.
3. Short selling was banned on financial stocks.
4. Traders use credit-default swaps to bet against many banks and lenders. Traders make investors concerned about the impact swap prices could have on companies. A setup is emerging for the traders profiting on the rapid sell of protection, if a bailout comes and bankruptcy does not.
5. Citigroup has $3tn plus in credit default swaps. Citigroup has received $45 billion in TARP funds. The funds try to prop up Citigroup swaps and help solve their GM default.
6. GM must fighting bankruptcy to prevent payouts of the CDS market. GM wants to exchange stock to get the company’s debt dropped from $63 billion to $30 billion. Unsecured creditors would take notes worth 30 cents on the dollar and GM stock. Current unsecured creditors hold $31.5 billion of $63 billion in debt. Reducing debt helps free up capital for operations.
1. Investor wants a Tangible Common Equity TCE above 3% for Citigroup. Citigroup TCE percent is 1.87 percent with a Tier 1 of 11.8 percent. The goal is to boost Citigroup equity and less desperate need for a takeover.
2. TARP injections were converted into $45 billion preferred shares. The government is being asked to convert the preferred shares to common shares, providing equity for Citigroup. By converting $45 billion of government owned preferred shares to common stock, it would increase TCE to 2.6 percent and give the government 40 percent ownership of the company. Citigroup wants to keep ownership below 50 percent and prevent nationalization. To get to a TCE of 4%, Citigroup would need to sell the government another $40 billion in preferred stock giving the government a 79 percent ownership.
3. There will be conversion price to convert preferred stock to common stock. Currently, there is $10 billion in common stock. If the preferred stock converts from $45 billion and common stock totals $65 then it means a $10 billion conversion price. The conversion price would be far above the current trading price.
4. Citigroup is encouraged by the government to find private sources of equity. They have been desperate to find the investor.
5. US banks are $1 trillion under capitalized. Bank standards for equity were not strong enough for the risks they took.