Executives of Citigroup, one of the biggest banks in the US, are in emergency talks with the US Treasury to gain much-needed funding, reports say. The bank is also said to have contacted certain shareholders to assess their interest in increasing their stakes as as it faces an uncertain future.
Citigroup stock ended 20% lower on Friday as its board members met.
Last week the company announced 52,000 job losses worldwide on top of 23,000 job cuts previously announced.
No one from Citigroup was immediately available for comment.
There are fears that without further funding the bank might not be able to survive. Any money would be in addition to the $25bn injection it received in October from the US Treasury.
Options being discussed included a government cash injection as well as Citigroup selling some of its business, reported The Sunday Times.
Chief executive Vikram Pandit told employees on Friday that the firm did not want to change its business model, Reuters reported, citing two employees.
He also reiterated that the firm had a robust capital position.
But Sean Egan, analyst at ratings agency Egan-Jones Ratings, said, "Citigroup needs a deep-pocketed investor that is ready, willing, and able to step up in the next few days."
"The only one who comes to mind is the government," he said, adding that $50bn might ne needed.
In a bid to reassure investors, Citigroup is running advertisements in US and international newspapers on Sunday underlining its stability.
It is widely expected that Citigroup will issue a statement on Monday before the US markets open.
Abu Dhabi buys Citigroup stake(2007):
Charles Prince stepped down as Citigroup's chairman and chief executive Nov. 4, the same day Citi announced that it will likely write down the value of its portfolio by $8 billion to $11 billion in the fourth quarter.
In the third quarter, the bank's exposure to assets tied to subprime mortgages led to a loss of about $6.5 billion.
The Investment Authority will receive equity units that pay an 11 percent annual yield until they are converted into Citigroup common shares at a price of up to $37.24 a share between March 15, 2010, and Sept. 15, 2011.
Analysts believe the Investment Authority is the world's largest sovereign wealth fund, although the fund has never publicly revealed its total assets. Analysts estimate the fund controls hundreds of billions of dollars, with some experts saying the amount could be approaching nearly a trillion dollars.
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Abu Dhabi's move recalls the early 1990s investment in Citi made by Saudi Prince Alwaleed bin Talal. After the bank made some losing bets on U.S. real estate and Latin America, Alwaleed bought a stake for less than $600 million that has since ballooned into billions.
The Abu Dhabi investment comes at a time when Citi is trying to reassure investors amid heavy credit-related losses and a search for a new CEO.
"This investment, from one of the world's leading and most sophisticated equity investors, provides further capital to allow Citi to pursue attractive opportunities to grow its business," Win Bischoff, acting chief executive, said in a statement.
"This investment also enables us to access capital in an efficient manner, and is consistent with our strategy of maintaining a balance sheet that benefits from highly diverse sources of funding in terms of both geography and type of security," Bischoff said.
Abu Dhabi to the Rescue!
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