Thursday, March 6, 2008

Citigroup CEO Vikram Pandit on Asia Tour as Writedowns Grow

by Michelle Roberts

The newly appointed Chief Executive Officer of Citigroup Vikram Pandit is on his first visit to Asia after taking the charge of the biggest US bank. Speculation has it that Citigroup is likely to suffer from more mortgage write-downs. On Monday and Tuesday the CEO was in Beijing and Shanghai and was in Hong Kong on Wednesday. On Thursday the CEO was in Seoul, a source said who did not have the authority to speak to the media; he also said that the CEO is on the tour to meet clients. The shares of Citigroup nosedived to their nine years lowest prices when an important investor from the Middle East said that the bank should gather more capital. An analyst also estimated that there would be bank mortgage write-downs worth $15 billion.

On the next day of the record decline of the shares of the bank the CEO was in Hong Kong. When an individual was briefed on the situation told in New York that the bank had sufficient capital and that it was not exploring ways to collect funds from investors outside. The Citigroup Asia has been a great source of income from where the bank was able to make a total profit of $4.6 billion last year which allowed the bank to register global total income of about $3.6 billion in 2007. The bank was able to accomplish its global net profit even though it suffered from a record $9.83 billion loss for the fourth quarter. The record loss for the bank was mainly because of mortgage write-downs.

The Citigroup has been raising capital since November last year and it sought investment from investors of Abu Dhabi, Kuwait, Saudi Prince Alwaleed bin Talal and from investors in Singapore. Head of the Gulf investment agency Dubai International Capital Sameer al-Ansari expressed that the bank is likely to require a still greater amount from investors following the billions of dollars of write downs engaged to the sub prime mortgages which led to decrease in the capital of Citigroup. The shares of the bank dropped by 6% to their nine years lowest as stockholders backed up because of estimates of still more losses for the bank. The comments made by a Middle East fund executive saying that the bank has to gather more cash so that it can stay in the business shows this.

The Chief Executive of the government owned investment company Dubai International Capital Samir Al Ansari while speaking at a private equity conference said that in order to save the bank the total efforts by the Gulf’s richest investors, the Abu Dhabi Investment Authority, the Kuwait Investment Authority and Saudi Prince Alwaleed bin Talal will not be enough. The bank will need more help from other than these investors. In January the Citigroup gathered $12.5 billion from a group of investors that also included investors such as Kuwait Investment Authority, the Government of Singapore Investment and Prince Alwaleed. Analysts of Merrill Lynch estimated that the bank will have to further write down $18 billion in mortgage.

 

 

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