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27-Feb-09
Citi’s Non-Nationalization; is Bank of America Next in Line?
It should come as no great surprise that the reaction to the much-anticipated “non-nationalization” of Citigroup (NYSE: C) announced today was underwhelming. The market has spoken, hitting Citi’s shares hard, and analyst comment collected at Alacra Street Pulse is overwhelmingly negative. A few sample comments:
“How much longer are we going to have to go through this? At this point, it’s just plain embarrassing. Can’t we just grab the place, chop it up, and sell off the pieces? What the market’s telling us this morning is that that outcome is inevitable, so we might as well get on with it.” - Henry Blodget at Clusterstock
“So for about 100% of the market value of Citi, plus insurance guarantees worth of as much as 500% of its value (~$275 billion), we got less than 1/10 of a company that in total was worth 1/5 of our investment.” - Barry Ritholtz at The Big Picture.
We would avoid the shares as it is unclear whether this is the last round of capital restructuring, which means that existing equity may be further diluted in the future. - Richard Ramsden at Goldman Sachs
Meanwhile, Egan-Jones, the credit research firm, said in a note to investors that it believed Bank of America (NYSE: BAC) was “next in line” for a government infusion of equity, according to DealBook.
According to Egan-Jones’s calculations, Bank of America will need $100 billion in equity within the next 100 days. That is in addition to the $45 billion in cash and $120 billion financial backstops that the government already committed to shore up Bank of America’s capital base.
Tagged Stocks: BAC
Posted at 10:03 in External Blog | Permalink | Top
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