Citi shares pummeled; bank mulling sale

Shares of Citigroup got pounded as the US banking giant faced an increasingly gloomy future in the wake of a string of bad news. The stock lost 50% of its value in the first four days of trade this week, including a 26% hammering on Thursday, which was its biggest one-day fall on record. In Frankfurt's pre-market trade on Friday, Citi's stock rose to US$5.64, up 20% from Thursday's levels after the Wall Street Journal reported that Citi's board will consider selling part or whole of the bank at a meeting on Friday. The talks are only at a preliminary stage, the Journal said, adding that Citi officials were considering scenarios that would have been unthinkable a few weeks earlier. Citi CEO Vikram Pandit had scheduled a conference call with other executives for 8 a.m. Friday (UST) to discuss the situation, the Journal reported. Apart from considering a sale of the entire bank, Citi is looking at the possibility of selling units such as the Smith Barney retail brokerage, the global credit card division and the transaction services arm, according to the Journal. The news seem to have a positive effect on global equity markets, which rallied on hopes that the troubled New York bank would find a buyer or could be rescued by the government.

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Cracks in the commercial real estate market, the Treasury's recent decision not to buy troubled assets from banks and Citi's own move to take on around US$17bn of assets from a subsidiary fund all hit the stock. Even a vote of support from Saudi Arabian investor Prince Alwaleed Bin Talal Bin Abdulaziz Alsaud, who said he will increase his holdings in Citi back to 5%, couldn't stem the decline in the stock price. Citi, along with other banks has been lobbying for further action from lawmakers, including asking the Securities and Exchange Commission (SEC) to reinstate a ban on the short-selling of financial stocks, the Journal reported. Citi has reported losses for four straight quarters, and has raised about US$75bn since December by selling assets and equity stakes, including a US$25bn injection from the US Treasury. Citi has lost about US$20bn in the past four quarters as bad loans increased and demand for banking services declined. CEO Vikram Pandit said this week the company will cut 52,000 jobs in the next year to lower costs.