Monday, November 24, 2008

Citi By The Numbers ...

TARP INFUSIONS ONLY INDIRECTLY RAISE COMMON STOCK PRICES

There is this post over at Brad DeLongs, with a high level view of what happened to Citi.

Here is another stylized view, Citi by the numbers:

At the end of 2006, Citibank had just under $90 billion in tangible, common shareholder equity. That would be about $18/share. The market liked Citi enough to pay up almost 2.7 times tangible book for a common share.

Twenty-one months later, by the end of the third quarter of 2008, Citibank had recognized $32.2 billion in credit losses and provisions for losses, earning 3.6 billion in 2007 and losing about $10 billion in 2008 (so far).

Tangible book value of common was $68.8 billion or about $12.60/shr and the market was paying up as little as $4-$6/shr, implying significant further loses. If those loses were in the range of $33 billion, it would imply a valuation of just 1.0 times tangible book (based on my guesstimates for earnings over the next 18 months).

Yes, that's a big drop in the premium paid. The stock is "washing out", as the pros say.

n.b. TARP "infusions" do not make the stock price go up or boost the capital stake for common holders, just for the firm as a whole. I'm guessing this may be creating a great deal of confusion in the punditocracy, because it looks like the TARP isn't "doing anything", because people are looking at the common stock price and asking, "why is it going down, not up, after TARP?"

See also, The Bankless Rally

WHAT'S THE BREAKDOWN FOR HOW CITI 'LOST' ITS MONEY SO FAR?


I don't have these figures in detail. The company did offer up this high-level summary, during it's "Townhall Meeting". "LLR" are loan-loss reserves. "S&B" is 'Securities and Banking', which, for them, includes structured products, trading, private equity, investment banking, hedge funds, and a lot more.

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