Citigroup May Need to Sell Assets to Bolster Capital (Update1)

[Joanne98]

April 19 (Bloomberg) -- Citigroup Inc. shareholders, cheered by a $5.1 billion first-quarter loss that wasn't as big as some analysts forecast, face growing concern that the bank may have to sell assets, reduce the dividend and attract outside investment to bolster capital.

Citigroup's so-called Tier 1 capital ratio -- a measure of its ability to withstand loan losses -- fell to 7.7 percent at the end of March, the New York-based bank said yesterday. Citigroup says it needs a 7.5 percent ratio to provide a margin of safety and preserve its credit ratings.

The bank's shares surged 4.5 percent yesterday after it reported $16 billion of asset writedowns during the quarter, less than some observers predicted. The writedowns burned through much of the $30 billion of capital Citigroup has raised since late last year, leaving it vulnerable to further charges and loan-loss provisions.

``We're in a recession, they have a huge consumer book, and there's huge double-digit-billion provisions that they're going to have to take in the next 18 months to two years,'' CreditSights Inc. analyst David Hendler said. ``They're undercapitalized for their risk.''

http://www.bloomberg.com/apps/news?pid=20601087&sid=aElaUvS1sxzw&refer=home

Do you ever notice how capitalists play the same "lower the expectations game" the politicians do?

[lurky]

1. The lower the expectations game pays big $$$$

If a company loses billions of dollars, but "beats analysts' expectations", it's stock will go through the roof. Conversely, if a company reports huge earnings, but they are not quite as strong as Wall Street expected, it will take a nose dive.