CITIGROUP'S BOARD was locked in talks yesterday in an attempt to resolve a crisis of confidence in the troubled financial services group that has sustained a loss of more than half its market value over the past three days.
As Citi shares plunged by as much as 20 per cent in early trading, sources said the board would discuss options, including the position of chief executive Vikram Pandit and the sale of some of its businesses or even the entire company.
However, these people said there were no concrete plans for management changes or asset disposals. Mr Pandit spent the morning trying to shore up his own position as he held a conference call with staff in which he reminded them of the company's strengths and vowed not to break up the group.
Mr Pandit, who is under fire for share-price underperformance and a perceived failure to present markets with a clear strategy for Citi, denied press reports the company was considering selling Smith Barney, its US wealth management unit. "I have got no desire to sell Smith Barney. I love that business," he said during the 26-minute call, which he hosted with chief financial officer Gary Crittenden.
Mr Pandit reiterated his backing for Citi's "universal banking" business model, combining wholesale, retail and investment banking. "This is a fantastic model," he told staff.
Mr Pandit and Mr Crittenden urged employees to get in touch with clients and remind them that the group's financial position was sound. Citi executives are worried about a flight of capital from the bank but say they have seen no unusual movement in retail or corporate deposits.
Mr Pandit, who took over last December, blamed the share-price slump on misinformation and scaremongering from investors, shortsellers and rivals, saying the company was in much better shape now than a few months ago.
He said the bank was working with regulators on a number of issues, a reference to the lobbying by Citi and other banks to reinstate a ban on shortselling.
In the conference call, Mr Pandit insisted that the bank's underlying business was strong, generating $100 billion (€79.6 billion) in annual revenues. Those revenues, along with plans to reduce Citi's annual expenses from their current $62 billion level to $52 billion in 2009, would give the bank an added cushion in an economic downturn, he said.
But Citi's shares continued to slip in morning trading and the cost to insure its debt against a default spiked higher. The stock recovered some of its losses to trade at $4.24 at midday, down just 10 per cent, giving Citi a market value of $21.7 billion.
Bank analysts seem to agree that Citi's fundamentals are sound. Mike Mayo of Deutsche Bank, who has been sceptical towards the bank over the past year, wrote that "we believe that there is fundamental value at Citigroup that justifies a $9 price target". - (Financial Times service)
