Citigroup Stock News – Shares Suffer On Worries Of Writedown
Citigroup Inc shares have been languishing around $4.00 per share, on worries that the company doesn’t have a well defined enough strategy to execute high profit margins. There is also grave concern that since the company is hoarding so much cash, the folks at C really don’t have a plan for getting a high return on capital.
A report by Calyon Securities analyst Mike Mayo two weeks ago also shook confidence in the firm. He thinks that Citigroup faces possible fourth quarter write-downs of $10 billion.
Despite receiving criticism about his viewpoint, Mayo reiterated his feelings on Thursday.
“Based on the amount of negative evidence that exists, we believe a write-down cannot be ruled out and, because the bank has cumulative losses in recent years, it has to shoulder a particularly heavy burden,” he wrote.
Mayo is basing his analysis on Citigroup’s position with deferred tax assets.
When the report first emerged in October, it was shrugged off by C officials.
“We have no idea how any analyst could have come to this estimate,” said company spokesman Steve Cohen at the time.
Now some investors might be worrying just what problems are right below the surface as Citigroup attempts to repay the government for its huge bailout funds and to return to profitability. There’s no question the company is under more public scrutiny that ever before, so any write downs they make for tax purposes will be closely scrutinized.
C is still facing enormous pressure due to the depressed housing market and increased unemployment. They have amassed a staggering $240 billion in cash as the prepare their loan loss reserves for more stunning losses. Cash hoards help with stability, but do little to increase growth.
If the economy remains stagnant, it’s hard to picture Citigroup stock going much higher in the near term. But for many people holding since $2.80 or so a share, it’s probably worthwhile to continue to hold, unless extremely bad news hits the wires.