Published: Saturday, 27 Mar 2010 | 5:53 PM ET
By: Steve Liesman
Senior Economics Reporter
Morgan Stanley has won a hotly-contested competition among Wall Street investment banks to be the underwriter and advisor on the sale of the U.S. government’s stake in Citigroup, one of the biggest stock sales in history, according to people familiar with the discussions.
The bank will be responsible for selling the government’s 27 percent stake in the bank in what is known as a “dribble-out” process that could take the rest of the year. The plan is to sell between 8 percent and 10 percent of average daily volume each day. That will likely begin after Citi reports its next earnings on April 19.
The government received the 7.7 billion of Citi
[C 4.16 -0.02 (-0.48%) ] shares in return for billions of dollars of aid given to the bank during the financial crisis. But the government now stands to profit. With a current price of $4.31, the shares are worth around $32 billion, which would leave the government with an $8.2 billion profit. Japan’s Nippon Telegraph and Telephone sale of $36 billion of stock in 1987 would be the only larger stock offering in history.
As the advisor, Morgan Stanley [MS 29.39 -0.04 (-0.14%) ] will be required to set up a process where the government has little discretion over timing. Sources said the government aims to create regular sales that don’t attempt to time or game the market or appear to act on inside information. But sales can be halted if the share prices drops below some price.
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As the amount of shares decline it’s possible that a large block of as many as a 1 billion shares could be disposed of in a managed sale or sales, sources said.
It was unclear if Morgan Stanley would be the sole underwriter on the deal. Typically a bank would choose one or more partners, especially a deal this size. Details were still being worked out this weekend, but a formal announcement could come as soon as Sunday.
The government still owns trust preferred in Citi, which it received from providing insurance for the bank’s assets. Those are valued at between $3 billion to $5 billion, but are less liquid than common shares. The government also owns 10-year warrants in Citi stock.
http://www.cnbc.com/id/36067336
Tuesday, March 30, 2010
Monday, March 29, 2010
Treasury sale of Citigroup stock the right move?
Wall Street is buzzing about the Treasury's plan to exit its massive TARP "investment" in Citigroup (NYSE: C). Most people assume it will sell its 27 percent stake via some sort of preset trading plan that will lock the government into a schedule for selling its shares. A formal announcement is expected at some point.
What remains a little murky at this point is what Treasury's thinking is. On one hand, the time may be ripe to sell its stake. Its shares have surged in to value at around $33 billion. So the stock sale would be massive. Reuters notes the only stock offering that comes close was made by Japan's Nippon Telegraph and Telephone, which raised $36.8 billion in 1987. But that was more of a traditional IPO. This would be more of a staggered sale along 10b5-1 lines. Still, this is a massive undertaking. And bragging rights may be on the line. J.P. Morgan Chase (NYSE: JPM), Morgan Stanley (NYSE: MS) and Goldman Sachs (NYSE: GS) are among those angling to be named underwriters. According to the Washington Post, Goldman Sachs has offered its services to the Treasury at almost no cost, industry officials familiar with the matter said. This recalls to some extent the IPO of Google (Google news), which banks felt they just had to be a part of somehow.
Would exiting the investment prove a wise move now? Many people are inclined to say yes. One expert told the Post, "This is just an incredibly bullish sign." The thinking is that a successful sale would validate the bailout plan that has generated so much controversy. It's unclear how much the sale would generate, but it just might represent a nice profit on the government's "investment." The Washington Post estimates the profit at $8 billion.
Another view, however, is that the Treasury is selling too soon. Several analysts think the value of the stock is heading north. And some think the government could net even more if it were to wait. One expert goes so far as to say that "the Fed and Treasury know more about the Citi balance sheet than analysts or investors, so a sale now represents a vote of "no confidence" in the bank and the credit markets."
There's no way of knowing of the stock will collapse in the near future, of course. It may be wise for the government to sell out now. A Sandler O'Neill analyst says a definitive TARP exit move by the government might spark more interest by institutions. Such a move could reduce fears that CEO Vikram Pandit (Vikram Pandit news) is merely a tool of the government. Another thing, it would end the fear that the government will dump shares at super-low prices.
You can bet Citigroup executives are hoping the sale goes through. - Jim
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Read more: http://www.fiercefinance.com/story/treasury-sale-citigroup-stock-right-move/2010-03-27?utm_medium=nl&utm_source=internal#ixzz0jcqJ8Vhu
http://www.fiercefinance.com/story/treasury-sale-citigroup-stock-right-move/2010-03-27?utm_medium=nl
What remains a little murky at this point is what Treasury's thinking is. On one hand, the time may be ripe to sell its stake. Its shares have surged in to value at around $33 billion. So the stock sale would be massive. Reuters notes the only stock offering that comes close was made by Japan's Nippon Telegraph and Telephone, which raised $36.8 billion in 1987. But that was more of a traditional IPO. This would be more of a staggered sale along 10b5-1 lines. Still, this is a massive undertaking. And bragging rights may be on the line. J.P. Morgan Chase (NYSE: JPM), Morgan Stanley (NYSE: MS) and Goldman Sachs (NYSE: GS) are among those angling to be named underwriters. According to the Washington Post, Goldman Sachs has offered its services to the Treasury at almost no cost, industry officials familiar with the matter said. This recalls to some extent the IPO of Google (Google news), which banks felt they just had to be a part of somehow.
Would exiting the investment prove a wise move now? Many people are inclined to say yes. One expert told the Post, "This is just an incredibly bullish sign." The thinking is that a successful sale would validate the bailout plan that has generated so much controversy. It's unclear how much the sale would generate, but it just might represent a nice profit on the government's "investment." The Washington Post estimates the profit at $8 billion.
Another view, however, is that the Treasury is selling too soon. Several analysts think the value of the stock is heading north. And some think the government could net even more if it were to wait. One expert goes so far as to say that "the Fed and Treasury know more about the Citi balance sheet than analysts or investors, so a sale now represents a vote of "no confidence" in the bank and the credit markets."
There's no way of knowing of the stock will collapse in the near future, of course. It may be wise for the government to sell out now. A Sandler O'Neill analyst says a definitive TARP exit move by the government might spark more interest by institutions. Such a move could reduce fears that CEO Vikram Pandit (Vikram Pandit news) is merely a tool of the government. Another thing, it would end the fear that the government will dump shares at super-low prices.
You can bet Citigroup executives are hoping the sale goes through. - Jim
SHARE WITH:
Read more: http://www.fiercefinance.com/story/treasury-sale-citigroup-stock-right-move/2010-03-27?utm_medium=nl&utm_source=internal#ixzz0jcqJ8Vhu
http://www.fiercefinance.com/story/treasury-sale-citigroup-stock-right-move/2010-03-27?utm_medium=nl
Thursday, March 25, 2010
BOA Takes Initiative; Going that "Extra Mile" to help Struggling Homeowners: Will $hiti Follow Suit?
Bank of America program to cut mortgage principal
March 24, 2010 — 2:51pm ET | By Jim Kim
A Bank of America (NYSE: BAC) program that will start in May will allow mortgage holders who are significantly underwater to reduce the principal on their mortgages over five years. Critics of loan modification efforts to date have been calling for such plans, especially for those stuck with negative amortization loans in which principal builds in return for lower monthly payments.
Bank of America's program, according to Reuters, offers "earned principal forgiveness" that calls for the bank to offer an interest-free forbearance of principal that the homeowner can turn into forgiven principal annually over five years, provided they stay current on their payments. Over five years, the loan value can be brought back to the home value if all goes well.
This is an interesting move, one that follows a suit that charges Bank of America has failed in its attempt to modify mortgages so far. The announcement of the new program also follows a report by the TARP watchdog that rips the home loan modification effort so far. We'll have to see how many people are able to access the plan. By the time the program really gets rolling, home values may be moving up a bit.
Click on title above to read related articles; http://www.fiercefinance.com/story/bank-america-program-cut-mortgage-principal/2010-03-24?utm_medium=nl
March 24, 2010 — 2:51pm ET | By Jim Kim
A Bank of America (NYSE: BAC) program that will start in May will allow mortgage holders who are significantly underwater to reduce the principal on their mortgages over five years. Critics of loan modification efforts to date have been calling for such plans, especially for those stuck with negative amortization loans in which principal builds in return for lower monthly payments.
Bank of America's program, according to Reuters, offers "earned principal forgiveness" that calls for the bank to offer an interest-free forbearance of principal that the homeowner can turn into forgiven principal annually over five years, provided they stay current on their payments. Over five years, the loan value can be brought back to the home value if all goes well.
This is an interesting move, one that follows a suit that charges Bank of America has failed in its attempt to modify mortgages so far. The announcement of the new program also follows a report by the TARP watchdog that rips the home loan modification effort so far. We'll have to see how many people are able to access the plan. By the time the program really gets rolling, home values may be moving up a bit.
Click on title above to read related articles; http://www.fiercefinance.com/story/bank-america-program-cut-mortgage-principal/2010-03-24?utm_medium=nl
Thursday, March 11, 2010
Citi to taxpayers: Thanks for the bailout, now pay up
The banking giant is showing its appreciation for a $45-billion infusion from the U.S. by slapping a $60 annual fee on many credit cards.
by DAVID LAZARUS, FierceFinance
March 09, 2010
Vikram Pandit, chief executive of Citigroup Inc., thanked taxpayers the other day for coming to his company's rescue with $45 billion in bailout cash.
"Citi owes a large debt of gratitude to American taxpayers," he told lawmakers in Washington. The bailout money, Pandit said, "built a bridge over the crisis to a sound footing on the other side."
And how is Citi expressing its gratitude for that act of taxpayer generosity?
It's slapping a $60 annual fee on many credit cards that previously had no fees and telling customers that if they don't like it, tough patooties. They can pay off any outstanding balance and take their business elsewhere.
Man, if that's Citi when it's grateful, I'd hate to see the company when it's cheesed.
Bank of America Corp. unleashed its own annual fee of as much as $99 on some cardholders last month. JPMorgan Chase & Co and Wells Fargo & Co. both say they have no plans to introduce such fees, but it's probably just a matter of time.
Citi isn't saying how many of its millions of cardholders nationwide are subject to the new fee, which takes effect April 1.
But it is saying that if you still want to keep your account, and if you want to avoid the fee, you'll have to run up at least $2,400 a year in purchases using that credit card.
Samuel Wang, a Citi spokesman, said imposing the fee was "necessary given the increasing cost of doing business."
He also patted Citi on the back for "taking a very different approach than others in the industry by communicating these changes in a clear way."
Wow -- communicating clearly with customers. What will the banking industry think of next?
Lake Forest resident Betty Atwell was among those who recently received notice that one of her four Citi cards will be hit with the annual fee. It's a card she's had for more than a dozen years and one that she seldom uses.
"These days, I only use cards that have some kind of reward, such as giving cash back," Atwell, 66, told me. "This card with the new fee doesn't have any rewards."
So close down the account. Easy, right?
Not exactly.
"My concern is that my credit score will be affected if I start canceling cards with annual fees," Atwell said. "Right now it's Citi, but you just know the other banks will follow."
She's right to be concerned.
Linda Sherry, a spokeswoman for the advocacy group Consumer Action, said canceling an older card that reflects long-term creditworthiness can indeed have an impact on your credit score.
Click on title above for rest of article;
http://articles.latimes.com/2010/mar/09/business/la-fi-lazarus9-2010mar09
by DAVID LAZARUS, FierceFinance
March 09, 2010
Vikram Pandit, chief executive of Citigroup Inc., thanked taxpayers the other day for coming to his company's rescue with $45 billion in bailout cash.
"Citi owes a large debt of gratitude to American taxpayers," he told lawmakers in Washington. The bailout money, Pandit said, "built a bridge over the crisis to a sound footing on the other side."
And how is Citi expressing its gratitude for that act of taxpayer generosity?
It's slapping a $60 annual fee on many credit cards that previously had no fees and telling customers that if they don't like it, tough patooties. They can pay off any outstanding balance and take their business elsewhere.
Man, if that's Citi when it's grateful, I'd hate to see the company when it's cheesed.
Bank of America Corp. unleashed its own annual fee of as much as $99 on some cardholders last month. JPMorgan Chase & Co and Wells Fargo & Co. both say they have no plans to introduce such fees, but it's probably just a matter of time.
Citi isn't saying how many of its millions of cardholders nationwide are subject to the new fee, which takes effect April 1.
But it is saying that if you still want to keep your account, and if you want to avoid the fee, you'll have to run up at least $2,400 a year in purchases using that credit card.
Samuel Wang, a Citi spokesman, said imposing the fee was "necessary given the increasing cost of doing business."
He also patted Citi on the back for "taking a very different approach than others in the industry by communicating these changes in a clear way."
Wow -- communicating clearly with customers. What will the banking industry think of next?
Lake Forest resident Betty Atwell was among those who recently received notice that one of her four Citi cards will be hit with the annual fee. It's a card she's had for more than a dozen years and one that she seldom uses.
"These days, I only use cards that have some kind of reward, such as giving cash back," Atwell, 66, told me. "This card with the new fee doesn't have any rewards."
So close down the account. Easy, right?
Not exactly.
"My concern is that my credit score will be affected if I start canceling cards with annual fees," Atwell said. "Right now it's Citi, but you just know the other banks will follow."
She's right to be concerned.
Linda Sherry, a spokeswoman for the advocacy group Consumer Action, said canceling an older card that reflects long-term creditworthiness can indeed have an impact on your credit score.
Click on title above for rest of article;
http://articles.latimes.com/2010/mar/09/business/la-fi-lazarus9-2010mar09
Monday, March 8, 2010
Friday, March 5, 2010
Country-Wide Settlement Checks "On the Way;"
Click on title above for article;
http://www.pontevedrarecorder.com/content/1783_1.php
http://www.pontevedrarecorder.com/content/1783_1.php
$hiti Grows With Feds Help
January 14, 2010 — 2:45pm ET | By Jim Kim
We're accustomed to thinking of Citigroup in very negative terms. But there is one unit that has weathered the storms very well, and remains integral to the company's success: Its transaction processing unit.
Through September 2009, the unit accounted for 10 percent of revenue and about half of the bank's profit. Executives like to paint it as something of a technological marvel--a vast and seamless transactions network that spans the globe. More than 80 governments and about 60 central banks rely on GTS--Global Transactions Services--to manage cash, payments, transfers and the like. GTS handles about 90 percent of the Federal Reserve Bank of New York's transactions in 180 countries and 90 currencies.
According to the Wall Street Journal, the importance of GTS was a factor in the three-part bailout of Citi, as executives argued that the bank couldn't fail because of the significance of its transactions network to the global financial system. According to the Wall Street Journal, through the bailout process, the unit has continued to seek and win government contracts, subtly using the fact that the government owned at one point a large equity stake to suggest that customers ought to support it.
Click on title above for original article entiteld "Citi Grows With Feds Help,"
http://online.wsj.com/article/SB126317001431624045.html?mod=WSJ_hpp_sections_business
Related Articles:
Weill looks at the ash heap of Citigroup
The fate of Citi as a consumer giant?
More on Citi's mobile strategy
Source; http://www.fiercefinanceit.com/news/taggedfeed/financeit_Citigroup/31830
We're accustomed to thinking of Citigroup in very negative terms. But there is one unit that has weathered the storms very well, and remains integral to the company's success: Its transaction processing unit.
Through September 2009, the unit accounted for 10 percent of revenue and about half of the bank's profit. Executives like to paint it as something of a technological marvel--a vast and seamless transactions network that spans the globe. More than 80 governments and about 60 central banks rely on GTS--Global Transactions Services--to manage cash, payments, transfers and the like. GTS handles about 90 percent of the Federal Reserve Bank of New York's transactions in 180 countries and 90 currencies.
According to the Wall Street Journal, the importance of GTS was a factor in the three-part bailout of Citi, as executives argued that the bank couldn't fail because of the significance of its transactions network to the global financial system. According to the Wall Street Journal, through the bailout process, the unit has continued to seek and win government contracts, subtly using the fact that the government owned at one point a large equity stake to suggest that customers ought to support it.
Click on title above for original article entiteld "Citi Grows With Feds Help,"
http://online.wsj.com/article/SB126317001431624045.html?mod=WSJ_hpp_sections_business
Related Articles:
Weill looks at the ash heap of Citigroup
The fate of Citi as a consumer giant?
More on Citi's mobile strategy
Source; http://www.fiercefinanceit.com/news/taggedfeed/financeit_Citigroup/31830
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