|
 |
Apr-30-2008Citigroup Increases Stock Offering to $4.5 Billion (Update2)(topic overview)
CONTENTS:
SOURCES
FIND OUT MORE ON THIS SUBJECT
Citigroup already has raised more than $30 billion of capital since December. A weakening U.S. economy and rising consumer delinquencies forced Chief Executive Officer Vikram Pandit to rescind assurances earlier this year that the bank didn't need to raise more funds. "This was extremely disappointing,'' William Fitzpatrick, an equity analyst at Optique Capital Management in Racine, Wisconsin, said in a Bloomberg Television interview. "We were hoping they wouldn't have to go the equity markets like this.'' Companies usually try to avoid forced stock sales because they dilute the earnings power of current shareholders. Citigroup, the biggest U.S. bank by assets, earlier this month sold $6 billion of preferred shares, a bond-like security that isn't dilutive to common shareholders. Citigroup fell about 3.8 percent to $25.32 in extended trading after the stock sale was announced this afternoon. It fell 49 cents to $26.32 earlier today in New York Stock Exchange trading. Both Pandit and Chief Financial Officer Gary Crittenden had said earlier this year that Citigroup may avoid the need to raise more capital. In January, Crittenden said the company had "stress-tested'' its assumptions under "multiple recessionary scenarios.'' [1] The New York-based bank said the offering will include an overallotment option to buy more shares. "We are issuing common equity at this time as we continue to optimize our capital structure," Gary Crittenden, chief financial officer, said in a statement. "We're pleased with the strong interest we have already received regarding this issuance." Earlier this month, after Citigroup released a $5.1 billion first-quarter loss following a nearly $10 billion loss in the previous quarter, Crittenden told analysts during a call, "We feel very good about our capital position," but that "you can never say never with regards to these things." Crittenden and CEO Vikram Pandit said during that call they would continue selling off noncore assets to shore up its balance sheet, but did not specify a stock offering.[2] The New York-based financial-services firm said it expects the offering to include an over-allotment option to purchase additional shares. On a pro forma basis, after giving effect to Citigroups recent issuance of $6 billion of preferred stock and an assumed issuance of $3 billion of common stock in this offering, as of March 31, the companys Tier One capital ratio would have been about 8.5%. We are issuing common equity at this time as we continue to optimize our capital structure, said Chief Financial Officer Gary Crittenden in a statement. Were pleased with the strong interest we have already received regarding this issuance.[3] 'We were pleased to increase the offering size to $4.5 billion in response to strong demand from a broad base of investors,' said Gary Crittenden, the company's chief financial officer. Citigroup, a component of the Dow Jones Industrial Average, said that, on a pro forma basis, reflecting its recent issuance of $6 billion in preferred stock and this $4.5 billion common stock offering, its Tier One capital ratio would have been roughly 8.6% as of March 31.[4]
The New York-based financial services company said that the transaction includes an over-allotment option for up to 17.81 million additional shares of common stock. On a pro forma basis, after giving effect to Citi's recent issuance of $6 billion of preferred stock and the issuance of $4.5 billion of common stock in this offering, as of March 31, 2008, Citi's Tier One capital ratio would have been about 8.6%.[5]
Shares of Citigroup, a Dow Jones industrial average component, fell 77 U.S. cents to $US25.55 in premarket electronic trading. New York-based Citigroup is one of many banks, including Bank of America Corp and Wachovia Corp to this year raise capital by issuing preferred or common stock. "Most of these banks keep saying they don't need more capital and then they raise more," said Walter Todd, a portfolio manager at Greenwood Capital Associates LLC in Greenwood, South Carolina, which does not own Citigroup shares. "Ending capital raises will help these stocks find a bottom." Citigroup said it priced 178.1 million shares at $US25.27 each, a 4 per cent discount to its Tuesday closing price. It said it may sell another 17.8 million shares to meet demand, which would boost the offering to $US4.95 billion.[6] NEW YORK (Reuters) - Citigroup Inc (C.N: Quote, Profile, Research ) said on Tuesday it plans to sell $3 billion of common stock to bolster its capital levels, sending its shares down in after-hours trading.[7] April 30 (Bloomberg) -- Citigroup Inc., the biggest U.S. bank by assets, fell in early New York trading after the company announced plans to sell $3 billion of stock to increase capital depleted by writedowns on subprime-related mortgages and bonds.[8]
NEW YORK (Reuters) - Citigroup Inc (C.N: Quote, Profile, Research ) said on Wednesday it sold $4.5 billion of common stock, 50 percent more than originally expected, bolstering the largest U.S. bank's balance sheet after billions of dollars of subprime mortgage write-downs and other credit charges.[9] Citigroup Inc, the largest bank in the U.S., which suffered a $15 billion net loss over the last two quarters, and reported more than $45 billion of write-downs and credit losses since 30 June last year, plans to raise $3 billion through sale of common stock.[10] Banks prefer to avoid forced sales of common stock as it dilutes the earnings of current shareholders. Citigroup has suffered heavy losses to financial products tied to the suffering housing industry, forcing the bank to reduce the value of its products by billions of dollars. In its latest quarter the bank said it lost $5.1 billion. "We are issuing common equity at this time as we continue to optimize our capital structure," said Gary Crittenden, Chief Financial Officer of Citigroup. "Were pleased with the strong interest we have already received regarding this issuance." This article is copyrighted by International Business Times.[11] The new share issue will take the total America's largest bank has raised since the beginning of the year to $41 billion, including $32 billion from sovereign wealth funds. Since the U.S. sub-prime mortgage crisis emerged in the U.S., Citigroup has been one of the worst-hit of the investment banks, writing off more than $33 billion on the value of its assets since the third quarter of last year, cutting 9,000 jobs and replacing its chief executive, Charles Prince, with Vikram Pandit. Commenting on the latest fundraising, Gary Crittenden, chief financial officer at Citigroup, said: "We are issuing common equity at this time as we continue to optimise our capital structure.[12]
The offering comes less than two weeks after Citi posted a $5.1 billion first-quarter loss and wrote down $12 billion in deteriorating fixed income securities. The bank last week sold $4 billion in preferred stock and in January raised $18.65 million through preferred offering and private placements to shore up its shaky balance sheet. "We are issuing common equity at this time as we continue to optimize our capital structure," CFO Gary Crittenden said in a company statement. "We're pleased with the strong interest we have already received regarding this issuance."[13] Citigroup's latest move to raise additional capital comes two weeks after the company reported a first-quarter net loss of $5.1 billion and a week after the company sold $6 billion of preferred stock. Earlier this month, Citigroup reported a first quarter net loss of $5.1 billion, following a $9.8 billion loss in the fourth quarter. Citigroup's capital raising drive comes as its seeks to plug the hole opened by about $38 billions in write-downs to reflect losses on complicated securities backed by mortgages, high-risk loans like those made to fund LBOs and other damage related to the credit crisis. This year, Citigroup has already raised more than $36 billion in fresh capital by selling stakes to long-term investors like sovereign wealth funds and by issuing preferred stock.[5] Citigroup is still struggling to recover from the $38 billion worth of writedowns on failed mortgages and high-risk loans. The company has already raised $36 billion this year by selling stakes to investors and issuing preferred stock. Other banks that have madder public offerings this month include Bank of America (BAC), which sold $4 billion in hybrid securities, Merrill Lynch (MER), which sold $2.55 billion in preferred stock, and JPMorgan (JPM) that sold $6 billion in preferred stock.[14]
Since late last year, Citigroup has raised more than $36 billion, including last week's sale of $6 billion of preferred stock. The bank also is selling assets, such as a $12-billion leveraged loan portfolio sold this month to private investors.[15]
Citigroup said Tuesday the latest offering will further boost the bank's Tier-1 capital ratio _ a measure regulators use to determine a bank's financial strength _ to about 8.5 percent, which is higher than it was throughout all of 2007. Already this year, the company has issued $6 billion of preferred stock and raised an additional $32 billion through stake sales to sovereign wealth funds, and sales of other assets. The cash-raising campaign comes as Citigroup seeks to lower costs after writing down the value of its assets tied to mortgages and other types of debt by about $38 billion. This year, the nation's largest bank by assets has announced about 13,200 job cuts.[2] The new equity, when combined with $6 billion of recently issued preferred stock, will raise Citigroup's so-called Tier 1 capital ratio to about 8.5 percent, the bank said.[1] The new equity, when combined with the preferred stock sold last week, will raise Citigroup's so-called Tier 1 capital ratio to about 8.6 percent, the company said.[16]
Crittenden said in a statement: "We were pleased to increase the offering size to $4.5bn in response to strong demand from a broad base of investors. This optimizes our capital structure and further strengthens our balance sheet." The bank said that on a pro forma basis, including Citigroup's recent issuance of $6bn of preferred stock and the issuance of $4.5bn of common stock in this offering, as of March 31, 2008, it's Tier One capital ratio would have been approximately 8.6%. When Vikram Pandit became chief executive in December, he said one of his key priorities was to shore up the capital base.[17] Regulators consider banks with a Tier 1 ratio of 6% "well capitalized.'' Citigroup fell about 3.8% to $US25.32 in extended trading after the stock sale was announced this afternoon. It rose 49 cents to $US26.32 earlier today in New York Stock Exchange trading. ''We are issuing common equity at this time as we continue to optimize our capital structure,'' Crittenden said in today's statement.[18] NEW YORK -- Citigroup Inc said it has sold $US4.5 billion ($4.8 billion) of common stock, 50 per cent more than originally expected, at a discount to raise capital, a sale that dilutes the holdings of existing shareholders.[6] The world's biggest banks, grappling with more than $300 billion of losses on mortgages, bonds and loans, have sought new capital to stave off credit-rating downgrades that might jeopardize client relationships and access to financing. Companies usually try to avoid forced stock sales because they dilute the earnings power of current shareholders. "They need the additional capital,'' said Ben Wallace, an analyst at Grimes & Co. in Westborough, Massachusetts, which manages $800 million including Citigroup shares. "The dilution factor is a secondary concern these days.''[16]
Meredith Whitney, an analyst at Oppenheimer & Co. who was one of the first to predict the extent of Citigroup's losses, said the latest stock offering may not be the last. "The fact that the company raised such a small amount of capital at this time confounds us,'' Whitney wrote in a note to investors yesterday. "Citi needs to raise an additional $10-$15 billion or sell several hundreds of billions worth of assets in order to truly shore up its capital position.''[16] Citigroup, the largest U.S. Bank, is looking to raise an additional $3 billion in capital as it seeks to stabilize its finances, announcing on Monday that it is offering more stock to investors.[11] The $3 billion stock sale is linked to an offering of $6 billion of preferred equity that Citigroup undertook last week. The latter meant the bank might brush up against certain regulatory capital limits.[19] The sale came barely a week after Citigroup sold $US6 billion of preferred stock. A few days before that, on April 18, Mr Crittenden told investors he wouldn't rule out more capital raising. "You can never say never," he said.[6] Investors and analysts had thought last week's $US6 billion sale of preferred stock had quenched Citigroup's capital thirst.[20]
Citigroup has been drained by about $US35 billion in write-downs stemming from credit-market turmoil. Its chief financial officer, Gary Crittenden, said the stock sale will "optimise our capital structure".[20] "We were pleased to increase the offering size to $4.5 billion in response to strong demand from a broad base of investors," said Gary Crittenden, Chief Financial Officer, Citigroup. "This optimizes our capital structure and further strengthens our balance sheet." This article is copyrighted by International Business Times.[21] Citigroup already has raised more than $US30 billion of capital since December. After posting a first-quarter loss of $US5.1 billion on April 18, chief financial officer Gary Crittenden said he couldn't rule out additional rounds of capital-raising. ''This was extremely disappointing,'' William Fitzpatrick, an equity analyst at Optique Capital Management in Racine, Wisconsin, said in a Bloomberg Television interview. ''I would say this is probably it, but I have said that before.''[18] Gary Crittenden, chief financial officer, said during the first quarter results conference call on April 18 that Citigroup was well capitalized as it had moved early to raise more than $35bn, although he did not rule out raising more capital. Crittenden said: 'You can never say never with regards to these things.[17]
Chief Financial Officer Gary Crittenden said the bank Increased the offering from $3 billion "in response to strong demand from a broad base of investors."[9]
NEW YORK (Thomson Financial) - Citigroup (nyse: C - news - people ) Wednesday disclosed the pricing of $4.5 billion common stock offering. The company said it's selling roughly 178.08 million shares at $25.27 each.[4] On April 29, Citigroup said it is selling about $3 billion of its common stock in a public offering to beef up its capital. Citi today priced its offering of $4.5 billion, or 178.08 million shares, of common stock at $25.27 per share.[5]
Citigroup priced $4.5 billion of common stock -- 50 percent more than the $3 billion it initially planned to raise -- at $25.27 per share. The move slightly dilutes current holders, who have already seen their shares fall more than 50 percent from their high last year.[22]
NEW YORK -- Citigroup Inc., trying to raise more money to offset two straight quarters of losses, said Tuesday it is selling about $3 billion of its common stock in a public offering.[2] Citigroup Inc., bracing for a continued surge in bad loans, said it plans to raise at least $3 billion in new capital by selling common stock.[23]
NEW YORK - Citigroup said it sold $4.5 billion of common stock on Wednesday, more than it expected to sell yesterday, citing strong investor demand as it seeks to stabilize its finances. Get stories by e-mail on this topic.[21] Citigroup Inc. has announced its plan to sell $4.5 billion in common stock via a public offering.[14] SAN FRANCISCO (Thomson Financial) - Citigroup Inc. late Tuesday said it has begun an offering of about $3 billion of common stock.[3] Battered financial titan Citigroup C on late Tuesday said it planned to offer $3 billion in common stock to boost its capital reserves depleted by the credit crisis.[13]
Diane Merdian, an analyst at financial services boutique Keefe, Bruyette & Woods, had said in a report that Citigroup under-allocated risk capital to the U.S. consumer division, especially cards. She estimated that, in a bad scenario with additional writedowns of $8.5bn in the wholesale business and $4.8bn for U.S. consumer, the bank would need to issue $13.3bn in common stock.[17]
At Citigroups annual shareholder meeting last week, Vikram Pandit, the chief executive, said the current dividend was in line with the companys long-term earnings potential. Some analysts disagree, saying Citigroup must take further action to protect its payout to shareholders. Meredith Whitney, an analyst at Oppenheimer who correctly predicted that the company would cut its dividend last October, said Citigroup needs to raise an additional $15 billion to $18 billion. That effort might include reducing the dividend further. While many banks have rushed to raise capital lately, the effort at Citigroup, which has lost nearly $40 billion from the credit crisis, stands out in its scale and diversity. It has raised money from public shareholders, foreign governments and big institutions, as well as from its former chairman, Sanford Weill.[24] Meredith Whitney, an Oppenheimer & Co analyst who last October correctly foresaw Citigroup's capital needs, said the bank still needs to raise $10 billion to $15 billion more, or shed several hundred billion dollars of assets. "The fact that the company raised such a small amount of capital at this time confounds us," Whitney wrote on Tuesday evening, after Citigroup set plans to raise $3 billion. Whitney said Citigroup may need to cut its dividend again, following January's 41 percent reduction.[9]
When it was announced that it would sell $6 billion in preferred shares, Citigroup ''joined the herd of other top banks. It just announced it will issue $3 billion more in common shares--at a 4 percent discount--a move that will further bolster its capital position.[25] Last week Citigroup sold $6 billion of preferred shares, a bond-like security that isn't dilutive to common shareholders, after it reported a $5.1 billion first-quarter loss and cut 9,000 jobs.[16]
"But Citi is also a commercial bank and the loans are getting bad as the economy is impacted.'' Selling shares may help Citigroup avoid cutting the bank's shareholder dividend for the second time this year, Wallace said. The company slashed the dividend by 41 percent in January, its first reduction since the early 1990s, to save about $4.4 billion a year.[16] Citigroup has recorded more than $40 billion of credit losses and writedowns since the subprime mortgage market collapsed last year. The world's biggest banks have raised more than $170 billion in capital to replenish their coffers. "We were hoping they wouldn't have to go to the equity markets like this,'' said William Fitzpatrick, an analyst at Optique Capital Management in Racine, Wisconsin, which held more than 550,000 Citigroup shares at the end of last year. "This was extremely disappointing.''[16] The shares will be sold in a public offering, New York- based Citigroup said in a statement yesterday. Citigroup dropped 3.4 percent to $25.42, adding to this year's 11 percent decline. "We were hoping they wouldn't have to go the equity markets like this,'' said William Fitzpatrick, an analyst at Optique Capital Management in Racine, Wisconsin, which held more than 550,000 Citigroup shares at the end of last year. "This was extremely disappointing.''[8]
Shares of Citigroup fell 90 cents, or 3.42 percent to $25.42 in late morning trading in New York. Other leading banks around the world have issued similar stock offerings as part of global bank push to restore profitability.[21] Citigroup fell as much as 4 percent in New York trading after the biggest U.S. bank said in a statement that it priced 178.1 million shares at $25.27 each, a discount to yesterday's closing price of $26.32.[16]
Shares of Citigroup fell 80 cents, or 3%, to $25.52 in after-hours electronic trading. They had fallen 49 cents during regular trading to close at $26.32. Other U.S. banks to raise capital this month include Bank of America Corp., Wachovia Corp., Washington Mutual Inc. and National City Corp.[15] JPMorgan Chase & Co., the third-biggest U.S. bank by assets, and Merrill Lynch & Co., the third-largest securities firm, also have raised capital in recent weeks by selling preferred shares. Chief Executive Officer Vikram Pandit and Crittenden said earlier this year that Citigroup might avoid the need to raise more capital.[8] The $US9 billion raised since the start of last week is the latest reversal on Citigroup's capital strength since Vikram Pandit became chief executive in December. Earlier this spring, Mr Crittenden said the company was well positioned and didn't need more capital beyond the $US30 billion it had raised at the time.[20] On April 18, when Citigroup reported a first-quarter loss of $US5.1 billion, Mr Crittenden wouldn't rule out raising more capital. "The fact is, you can never say never with regards to these things," he said. William Smith, who runs a money-management firm that owns Citigroup shares and has been supportive of Mr Pandit's efforts to revitalise the bank, said he wasn't terribly bothered by additional dilution. "It's the credibility of management," he said.[20]
Citigroup's market value is about $138 billion, based on the closing price and reported shares outstanding as of 31March. Citigroup said the current stock sale, together with its recent preferential issue, will leave its Tier-1 capital ratio as of 31 March at 8.5 per cent on a pro forma basis.[10] The combined $10.5 billion in sales of common and preferred stock would have given Citi a Tier One capital ratio of about 8.6% as of March 31.[26] The move also further strengthens the firm's balance sheet. This sale of common stock follows a previous issuance of $6 billion in preferred stock.[26]
Merrill Lynch & Co. (MER) last week sold $2.55 billion in preferred stock and the previous week saw J.P. Morgan Chase & Co. (JPM) selling $6 billion in preferred stock.[5] Merrill Lynch MER and Lehman Brothers LEH also recently sold preferred stock and Bank of America BAC last week sold $4 billion in hybrid securities.[13]
April 30 (Bloomberg) -- Citigroup Inc., under pressure to bolster capital depleted by mounting losses, sold $4.5 billion of stock, 50 percent more than it planned.[16] Citi Markets & Banking is serving as sole book-running manager of the $4.5 billion stock offering. Earlier this month, Citigroup reported a first quarter net loss of $5.1 billion, following a $9.8 billion loss in the fourth quarter.[26] Citi is far from alone among cash-starved banks resorting to raising money in the public and private markets. Earlier this month, Washington Mutual WM, Wachovia WB and National City NCC all raised $7 billion in either stock offerings, private equity investments or both after posting quarterly losses.[13]
Citigroup, the largest U.S. bank, has now raised more than $40 billion worth of capital since the housing and credit market crisis began last summer as it looks to offset heavy losses linked to failed home loans.[21] Citigroup has had more than $40 billion of credit losses and writedowns since the subprime mortgage market collapsed last year. The world's biggest banks have raised more than $170 billion in capital to replenish their coffers.[8]
The new capital will help offset the mounting losses the bank has taken as the mortgage and credit markets have deteriorated since the middle of 2007. Earlier this month, Citigroup said it lost $5.1 billion during the first quarter, following nearly $10 billion in losses during the last three months of 2007.[27]
The move comes barely a week after the New York bank raised $6 billion in the credit markets, bringing the total infusion Citigroup has recently collected from investors to about $39 billion.[23] Citigroup is set to raise a further $3 billion (£1.5 billion) by issuing new shares to shore up its balance sheet, after already tapping investors for $6 billion earlier this month.[12] Citigroup said Tuesday that it would sell $3 billion of new common shares in another effort to shore up its balance sheet.[19] Citigroup, the banking giant, said Wednesday morning that it would sell $4.5 billion of new common shares in another effort to shore up its balance sheet.[24]
Citigroup on Tuesday announced plans to sell $US3 billion of common stock.[6] The size of the offering represents a 50% increase from the details the company disclosed on Tuesday when it said it planned to sell about $3 billion worth of common stock.[4] The size of the offering was increased from an announcement made the previous evening, when the company said it planned to sell $3 billion in stock.[26]
The bank had initially announced Tuesday that it would sell $3 billion in shares but increased the offering because of demand.[24] Yesterday the bank said it would be raising $3 billion in capital through a share offering.[21]
News of the planned offering drove shares of Citigroup down. They ended regular trading at $26.32 Tuesday, down 49 cents. Citigroup said the latest offering would strengthen its capital position and safeguard its quarterly dividend, which Citigroup slashed in December.[24] Citi shares fell 82 cents, or 3.1 percent, to $25.50 in after-hours trading after falling 49 cents to close at $26.32. "Having a healthy capital position is a good thing _ they're under a tremendous amount of market stress," Niswander said. "However, if Citigroup would raise this amount of money everyday for the rest of the year, it wouldn't help. AP Business Writer Lauren Shepherd contributed to this report.[2]
The bank's stock fell 83 cents or 3.2 percent, to $25.49 in morning trading, following the sale of 178.1 million shares at $25.27 each, or 4 percent below the Tuesday closing price.[9]
The Goldman Sachs analyst, who has a '''sell''' rating and US$20 price target on Citigroup, estimates earnings per share (EPS) dilution of about 2% on a full-year basis given the investment bank'''s announced US$3-billion common stock offering after the bell on Tuesday.[28] The assumed price is US$25 per share. Mr. Tanona lowered his 2009 and 2010 EPS estimates by US5'' to US$2.95 and US$3.70, respectively. He noted that this offering represents Citigroup'''s fifth capital raise for a total of US$40-billion in the past five months. '''Although the company indicated that it was raising the common equity to '''optimize''' its capital structure, we struggle to see how selling more expensive common equity optimizes its capital structure unless it was at risk of having its debt downgraded by one of the rating agencies,''' the analyst told clients. He believes one or more of the ratings agencies were not comfortable with Citigroup'''s current capital mix, which led to the US$3-billion offering. If this proves correct, additional capital raises will also likely come in the form of common equity, Mr. Tanona added. This is most dilutive for shareholders, but a positive for debt holders.[28]
The offering is the first in Citigroup's recent capital-raising to involve common stock. "Obviously it's dilutive, but it's smarter than going out and having to pay a high premium for a preferred issuance." said William Smith, chief executive of Smith Asset Management in New York, which owns Citigroup shares.[7] The New York-based bank offered 178 million shares of common stock priced at $25.27 per share, the company said in a statement.[21]
Citigroup has sold $4.5bn ('2.9bn) worth of common stock after already raising more than $35bn in new capital since November and saying it was well capitalized earlier this month.[17] Citigroup will sell US$3 billion of common stock to bolster its capital levels.[29]
April 29 (Bloomberg) -- Citigroup Inc., the U.S. bank hit with writedowns on subprime mortgages and bonds, is selling $3 billion of stock two weeks after reporting its second straight quarterly loss.[1] The largest U.S. bank is raising capital after suffering a $15 billion net loss over the last two quarters, and reporting more than $45 billion of write-downs and credit losses since June 30.[7] The sale means the largest U.S. bank has raised more than $US40 billion of capital since late last year.[6] The bank had reported 7.7 per cent Tier-1 capital adequacy ratio as of 18 April. Other U.S. banks, including Bank of America Corp, Wachovia Corp, Washington Mutual Inc and National City Corp, are raising capital this month. Top global banks have together raised over $170 billion to replenish their capital.[10]
The bank's latest fund-raising comes barely a week after it issued $6bn of preferred shares. Citigroup has raised more than $36bn to fund its losses and write-downs, mostly related to the U.S. sub-prime crisis.[30] After Pandit moved into the chief executive's role, the bank put in place a support facility for Citigroup-advised structured investment vehicles and the following month raised $12.5bn through selling convertible preferred securities. In March, analysts believed the bank still needed to raise more money, because of the continued declines in leveraged loans the bank has on its books, potentially more writedowns for mortgage-related securities and losses in home-equity loans as problems in the housing market continue.[17]
Chief Executive Officer Vikram Pandit asked investors for new funds after the bank had already raised more than $37 billion during the past five months, more than any financial- services company.[16]
Citigroup and BofA join big competitors in efforts to raise new billions through stock sales. Two more large banks have passed the hat in a bid to strengthen their capital position.[22] The common stock offering will raise the banks Tier 1 capital ratio to about 8.5 percent.[11] Dozens of banks have been looking to raise capital by issuing common or preferred stock, or debt securities, including Bank of America and regional bank First Horizon National. Even relatively strong banks such as JP Morgan Chase have gone to market to pad their coffers. Many investors are eager to pour cash into the U.S. banking industry despite its continuing woes.[20]
Bank of America announced that it priced $4 billion in preferred stock.[22] The offering comes barely a week after Citigroup sold US$6 billion of preferred stock.[29] Citi Markets & Banking is serving as the book-running manager of the offering. Just last week at a meeting for shareholders, Pandit called 2007 a "year of disappointments" for Citigroup, and that in regards to the recent seize-up in the credit markets, "I think we're closer to the end of this phase than the beginning." The stock market and credit markets have been much calmer than they were earlier in the year despite a rough first-quarter earnings period, and SNL banking analyst Kris Niswander noted that there's been heavy subscription to recent market offerings.[2] The public offering, announced after the close of regular trading in the U.S. yesterday, is likely to slightly dilute current Citigroup shareholders, who have seen the stock price tumble 51 per cent in the past year.[20]
At 4pm in the U.S., in New York Stock Exchange composite trading, Citigroup was down US49 cents, or 1.8 per cent, at $US26.32.[20] Citigroup stock fell 80 cents, or 3 per cent, to $25.52 in after-hours electronic trading. They had fallen 49 cents during regular trading.[10]
Strong interest has been shown in the public offering, which may grow in size to meet demand. Citigroup announced the offering following a 46 per cent run-up in its stock price from a 52-week low of $US18.00 set on March 17th.[29]
Citigroup said it may boost the offering to $4.95 billion to meet demand. Citi said on its April 18 earnings call "that we have been proactive and we intend to continue to manage our capital such that we have a strong balance sheet."[31] "We were pleased to increase the offering size to $4.5 billion in response to strong demand from a broad base of investors," said Citi's CFO, Gary Crittenden. "This optimizes our capital structure and further strengthens our balance sheet."[22]
However some analysts expressed surprise that the latest round of capital raising amounted to just $3 billion. Oppenheimer, the U.S. brokerage, said: "By our estimates, we believe Citi needs to raise an additional $10 billion to $15 billion or sell several hundreds of billions worth of assets in order to truly shore up its capital position."[12]
Citigroup already has raised more than $30 billion of capital since December, including the sale of equity to investment funds controlled by foreign governments in Abu Dhabi, Singapore and Kuwait.[8] With the sale Citigroup, battered by write-downs on mortgages, will have raised more than $40 billion since November.[24]
Since late last year, Citigroup has raised more than $40 billion of capital, including $10.5 billion over the last week-and-a-half.[9] Citigroup has so far reported over $40 billion in credit losses and writedowns since the subprime mortgage market collapsed last year.[10] Citigroup has struggled with debt write-downs and credit losses, and posted net losses of close to $US15 billion over the last two quarters.[6]
The bank has suffered more than $46 billion of credit losses and write-downs since the end of June, and lost close to $15 billion in the last two quarters.[9]
Crittenden said Wednesday that the bank increased the offering from $3 billion "in response to strong demand from a broad base of investors."[31] The offering, priced at $25.27 per share, comes just two weeks after the company experienced a net loss of $5.1 billion in the first quarter.[14]
Analysts said selling shares makes sense after Citigroup stock rose 46 percent from the low of $18.00 on March 17, a level not seen since October 1998, on optimism that the worst of the write-downs may have passed.[7] Shares of Citigroup fell 92 cents, or 3.5 percent, to $25.40 during premarket trading.[27] Citigroup shares, which are trading in the range of $17.99 to $55.55 over the past year, closed Tuesday's regular trading session at $26.32, down 49 cents or 1.83%.[5]
At group level, Citigroup posted a $5.1bn net loss compared with a $5bn profit a year earlier. Separately, Citigroup has hired Derek Bandeen from Morgan Stanley, Pandit's former firm, as head of global equities trading.[17]
At the current rate, Citigroup still pays out more than $6 billion a year.[16] Citigroup said it may boost the offering to $4.95 billion to meet demand.[9] The bank launched the $3bn offering yesterday after the market close with Citigroup as the sole bookrunning manager.[17] The company said it intends to use the net proceeds for general corporate purposes. These offerings come on the heels of others from Citigroup, Merrill Lynch, and JPMorgan Chase. Dow Jones explains that the credit crunch has forced embattled banks to become more creative in order to boost their Tier I capital, which is a bank's core capital. It stresses that if the core falls below a required level, regulators can step in and the bank may be vulnerable to downgrades.[22] Regulators consider banks with a Tier 1 ratio of 6 percent "well capitalized.'' Citigroup sets its Tier 1 target at 7.5 percent, to give itself a margin of error and help avoid a downgrade of debt ratings. When the company reported its first-quarter loss, Standard & Poor's said it was reviewing the bank's credit rating, currently AA-, for a possible downgrade.[8] U.S. regulators consider a bank with a Tier 1 ratio of at least 6 percent to be "well-capitalized."[21] U.S. regulators require at least 6 percent in Tier 1 capital to qualify a bank as "well-capitalized."[11]
The Tier 1 capital ratio is a measure indicating how well a bank can withstand losses.[21] The company remains well above the 6% Tier 1 capital ratio that is the lower limit of what regulators consider well capitalized.[5]
The sale seeks to raise capital, but is viewed as more negative news for Citigroup investors since the sale will decrease the value of current shares. [14] Notes the New York Times, it eases the capital crunch that the issuance of preferred shares created; certain regulatory limits were in play with preferred share sales. The issue is whether this will solve Citigroup's capital problems.[25]
Citigroup has announced plans to sell $3bn ('1.5bn) worth of new shares to strengthen its financial position.[30] In November, when Sir Win Bischoff was acting chief executive, Citigroup agreed to sell $7.5bn ('4.6bn) of equity units, which convert into common shares, in a private placement to the Abu Dhabi Investment Authority, the sovereign wealth fund.[17]
Citi revealed that it will sell about 178.08 million in stock at $25.27 per share.[26]
The U.S. Federal Reserve is also widely expected to cut interest rates that day. If the central bank suggests that stability is returning to the financial system, bank stocks may rally, which could help Citigroup get a better price for its shares.[7] Citigroup plans to sell the stock on Wednesday, the day when the U.S. Federal Reserve is also expected to announce a cut in interest rates.[10]
Citigroup Inc. will sell 50% more stock that it said earlier this week it would, responding to "strong demand from a broad base of investors."[32]
The company planned the common-stock sale as a companion to the preferred deal, the person said, even though Citigroup didn't mention the stock sale last week.[20] The stock sale appears to suggest a shift in thinking within Citigroup management.[9]
From here you can use the Social Web links to save Citi to raise $US3bn in stock sale to a social bookmarking site.[20]
Citigroup stock has risen 46 per cent from a low of $18 on 17 March, a level not seen since October 1998, on expectations that the worst of the write-downs may have passed.[10] The offer, the first in Citigroup's recent capital-raising to involve common stock, is expected to dilute promoter holding in the bank, said an analyst, adding, it is a better option than paying a high premium in a preferential issue.[10]
Chief Financial Officer Gary Crittenden, on a conference call on Citigroup's earnings, was asked then if the bank might seek more capital.'' He said, "You can never say never."[31] Chief Financial Officer Gary Crittenden said Citigroup had received "strong" interest in the public offering.[15] Chief financial officer Gary Crittenden said it increased the offering "in response to strong demand from a broad base of investors.[6]
"We continue to optimize our capital structure,'' Chief Financial Officer Gary Crittenden said in yesterday's statement.[8] The size of today's sale was increased in response to "strong demand from a broad base of investors,'' Chief Financial Officer Gary Crittenden said in the statement.[16] The company may increase the issue size depending on the market response, chief financial officer Gary Crittenden said in a statement.[10]
Crittenden said in January that the company had "stress-tested'' assumptions under "multiple recessionary scenarios.'' Then the bank posted its first-quarter loss and Crittenden was asked on an April 18 conference call with analysts if the bank might seek more capital. "You can never say never,'' he said. [16] Meredith Whitney, the Oppenheimer analyst who has emerged as the bank's bete noire, says the dividend is still in danger, despite assurances from CEO Vikram Pandit that the payout was in line with earnings projections. She thinks the bank needs to raise up to $18 billion more.[25] Bank of America Corp. (BAC) sold $4 billion in hybrid securities last week.[5] Rising consumer-loan delinquencies may force the bank to set aside higher reserves to cover bad debt, Standard & Poor's said. Earlier this year, the bank posted a record loss of $9.83 billion for the fourth quarter.[1]
Altogether, Citi has raised more than $40 billion from investors, according to The Wall Street Journal.[22] Billionaire investor Warren Buffett is providing some financial backing for candy maker Mars' $23 billion purc.[24]
Even with January's cut, Citigroup's annual dividend payout would exceed $6.5 billion.[9] Britain's biggest mortgage lender asks its shareholders for $7.9 billion and cuts dividend as it grapples with.[24]
At Citigroups annual shareholder meeting last week, Vikram Pandit, the chief executive, said the current dividend was in line with the companys long-term earnings potential.[19] At the company's annual meeting last week in New York, Pandit said, "2008 remains a challenging time for financial markets and, in general, for our entire industry.''[1]
The shares are being sold in a public offering, New York- based Citigroup said today in a statement. [1] Citigroup (C) said the offering will include an '''over-allotment''' option to purchase up to 17,807,677 additional shares.[14]
Apart from Citigroup, many other banks have come out with multibillion dollar offerings in the past two week, taking advantage of present market conditions.[5]
JPMorgan Chase & Co. and Merrill Lynch & Co. also have opted to raise capital in recent weeks by selling preferred shares instead of common. [1] The transaction value includes an overallotment option for an additional 17.8 million shares of common stock.[27]
The shares fell 2.6 per cent (US69c) to $US25.63 in after-hours trading.[20] Citi shares were falling 2.9% to $25.57 in recent after-hours trading.[13]
The companys shares closed the regular session down 49 cents, or about 1.8%, at $26.32.[3]
In the pre-market, the stock lost additional 76 cents or 2.89% to trade at $25.56.[5] The stock finished Tuesday at $26.32, meaning the pricing represents a discount of about 4% to the closing price.[4]
Citigroup plans to sell the stock on Wednesday, people briefed on the matter said.[7] In a statement today the bank said it could sell an additional 17.8 million shares to meet investor requests.[21] The sale represents about 3 percent of the bank's shares outstanding as of March 31.[16]
In total, the bank's capital raising has diluted current shareholders by about 20 percent, Wallace estimated.[16]
Since late 2007, Citigroup has raised more than US$36 billion in capital after subprime mortgages and other debt caused massive write-downs.[29] The market doesn'''t seem to like the news as Citigroup shares were down 2.5% minutes after the market opened on Wednesday.[28]
SOURCES
1. Bloomberg.com: Worldwide
2. Citigroup offers $3 billion in common stock to offset losses | Chron.com - Houston Chronicle
3. Citigroup begins $3B common stock offering | Latest News | News | Hemscott
4. UPDATE: Citigroup shares slide; co. boosts common stock offering by 50% to $4.5B - Forbes.com
5. Citigroup Now Plans To Sell $4.5 Bln In Common Shares [C] - RTTNews, Today's Top Stories, Global Newswires, ToDay's Top News,Global Business news .
6. Business Spectator - Citigroup sells $US4.5bn stock, 50% above plan
7. Citigroup to sell $3 bln in stock; shares fall | Markets | Hot Stocks | Reuters
8. Bloomberg.com: Worldwide
9. Citigroup sells $4.5 bln stock, 50 pct above plan | Reuters
10. domain-b.com : Citigroup to raise $3 billion in capital through fresh stock sale
11. Citigroup Seeks More Capital, Will Sell $3 Billion in Stock - International Business Times -
12. Citigroup taps investors for further cash filip - Times Online
13. Citi to Sell $3 Billion in Stock | Banks | BAC C LEH MER NCC WB WM - TheStreet.com
14. Citigroup to Raise $4.5B in Common Stock Offering
15. Citigroup plans to raise $3 billion in stock offering - Los Angeles Times
16. Bloomberg.com: Worldwide
17. People Moves from Financial News Online US
18. Citigroup to sell $US3b of stock | theage.com.au
19. Citigroup to sell $3 billion in stock - International Herald Tribune
20. Citi to raise $US3bn in stock sale | The Australian
21. Citigroup Boosts Capital Raise to $4.5 Billion; Shares Fall 3 Pct - International Business Times -
22. Banks Aim to Fortify Their Vaults - - CFO.com
23. Free Preview - WSJ.com
24. Citigroup sells $4.5 billion in shares - International Herald Tribune
25. Citigroup to issue $3 billion in common stock - FierceFinance
26. Citigroup Prices $4.5 Bln. Stock Offering [C] - RTTNews, Today's Top Stories, Global Newswires, ToDay's Top News,Global Business news .
27. Citigroup raising $4.5 billion through common stock offering
28. Ratings agencies may not have liked Citigroup's capital risk, more capital raises could come as common equity - FP Trading Desk
29. Citigroup drums up fresh stockholders
30. Mortgage Solutions - Citigroup to sell $3bn of shares
31. Citigroup Boosts Common Stock Sale to $4.5 Billion - Financials * US * News * Story - MSNBC.com
32. Free Preview - WSJ.com
GENERATE A MULTI-SOURCE SUMMARY ON THIS SUBJECT:
Please WAIT 10-20 sec for the new window to open...
You might want to EDIT the default search query below:
Get more info on Citigroup Increases Stock Offering to $4.5 Billion (Update2) by using the iResearch Reporter tool from Power Text Solutions.
 |
|  |
|
