Citigroup’s fall from grace: no longer No. 1

Citigroup Inc., which not long ago ranked as the largest bank in the world, as of Wednesday slipped to just the fifth-biggest in the United States by market value.

The fallen giant’s market capitalization fell to $35 billion, after it stock slipped another 23% on Wednesday to $6.45 a share. Its stock is down 78% on the year.

Citi now ranks behind Minneapolis-based U.S. Bancorp, which has a market value of $41.5 billion.
Little more than a year ago Citi had a market value of $250 billion and, along with J.P. Morgan Chase & Co. and Bank of America Corp., dominated the U.S. banking scene.
But Citi has been devastated by the credit crisis. It has piled up nearly $70 billion in mortgage-related losses to date.

Wednesday’s stock decline came amid news the bank would buy $17.4 billion of its own, off-balance-sheet structured investment vehicles.
Those SIVs borrow in the short-term markets to invest in longer-dated assets.
The market for SIVs collapsed last year, and Citi agreed soon after to guarantee billions of their liabilities, making Wednesday’s move something of a formality.

Nonetheless the action reminded investors of the considerable risks on Citi’s balance sheet and management’s difficulty in getting the bank beyond its numerous problems.
Citi’s stock has slipped 32% this week since Monday, when Chief Executive Vikram Pandit unveiled plans to shrink staff by 52,000 people, or 15%.

Citi has posted $20 billion of net losses over the past four quarters and is expected to report another loss for the quarter ending Dec. 31.
Fox-Pitt Kelton analyst David Trone, who 12 days ago forecast Citi would post a loss of 8 cents a share, on Wednesday widened his estimate to a loss of 79 cents a share, citing rising credit costs and another $3 billion in mostly mortgage-related write-downs.

“The specter of Citi’s problem asset levels…continue to hinder investor confidence in the story,” Mr. Trone wrote.

Related Topics: Citigroup Inc.