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Thursday, June 19, 2008 12:57 PM

How Citigroup Games The Play

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Here is news virtually no one should be surprised by: Citigroup CFO sees big potential Q2 write-downs.

Citigroup (C) could take substantial write-downs for subprime mortgages, leveraged buyout loans and other assets in the second quarter, the company's chief financial officer said on a call with investors on Thursday.

In at least some of these areas, the write-downs are on track to be smaller than the first quarter, but could still be substantial, CFO Gary Crittenden said. Crittenden's disclosure, in a conference call sponsored by Deutsche Bank, sent Citi shares 4 percent lower, while rival banks Bank of America Corp (BAC) and JPMorgan Chase & Co (JPM) were down 4.4 percent and 3.3 percent, respectively.

In the first quarter, in which Citi posted a $5 billion loss, the bank took a $1.5 billion write-down for exposure to bond insurers. Costs linked to worsening consumer credit quality could have a meaningful impact on Citi's results for the rest of the year, Crittenden said.

The company is always willing to look at acquisitions, and will make them where it makes sense, but is focusing more on improving its performance, he said.
Acquisitions?! You've got to be kidding me.

Citigroup is not going to be acquiring anything. Citigroup is going to be selling assets to raise capital and Citigroup is going to be slashing or eliminating its dividend. Of course Crittenden did say "where it makes sense" to which I say "it makes no sense anywhere" so why make the statement?

Presumably Crittenden wants to convey the idea that it is in a position to make acquisitions. Well, it's not and everyone knows it, so it's just the kind of statement that makes you look foolish when you make it.

How The Game Is Played

Mr. Practical had these comments on Citigroup.
Citigroup Shows How the Game Is Played

For those that bought Citigroup (C) stock on the secondary at $25.27, I hope you understand the game you are playing. Banks will be raising capital continuously, so really think about what is going on.

The CDO market has improved since C issued this stock back in April. So now it's writing it down? Wouldn't this mean there is some probability the company knew that it would eventually have to write-down further this portfolio, something it didn't disclose? This is conjecture, but it's logical.

For those bottom fishing, forget about hope and trust. This is about survival. Do your homework. Risk is high.
Yes, this is about survival, yours, mine, and Citigroup's. And this is how Citigroup attempts to game the play to do it.

Mike "Mish" Shedlock
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