Citigroup’s capital levels are way down. Part of this comes from a drop in the value of its asset base and part from a string of acquisitions that the bank has made.
A new analysis from research house CIBC reviewed by The New York Times points out that "Citigroup has spent more than $26 billion on acquisitions since spring 2006. That, on top of the $5.9 billion in losses and a 10 percent dividend increase in January, has strained its capital position." CIBC also cut its rating on Citi and said that its share price could fall another 28% from its current level of $42.
Citi has a yield of 5.1% on a dividend of $2.16. The company has almost five billion shares outstanding. A lot of money? Yes. JP Morgan’s (JPM) yield is only 3.3%.
Citi may not be able to solve problems in its mortage-backed loan pools or its near-distressed LBO debt. There may be more write-offs on those in the fourth quarter.
But, it could cut its dividend, and put that money toward its troubled capital base.
Douglas A. McIntyre
Top Gaining Stocks
Top Losing Stocks