Magazine article American Banker

Golden State Deal Fails to Boost Citigroup Shares

Magazine article American Banker

Golden State Deal Fails to Boost Citigroup Shares

Article excerpt

Many Wall Street analysts say they love Citigroup Inc., but investors appear to have a different view.

Like those of other large banking companies, Citi's shares have been on a

rocky ride. After recovering from a steep decline late last year, the stock began to fall again in January. It bounced back in February, but is still down 14% for the year.

Last week's announcement that Citi would buy California's Golden State Bancorp has not had much effect on Citi's stock. On Thursday the shares fell 0.37%.

Wall Street's bears argue that the Golden State deal would not fully address Citi's problems. Some critics argue that the $1 trillion-asset company's diversification strategy has made it too complicated for investors to understand. Others contend that Citi does not have adequate reserves to satisfy concerns over its exposure to the global economic downturn.

For example, David Hendler, an analyst with the research firm CreditSights, said Latin America could provide further problems down the road. Questions about off-balance-sheet exposure and the risks of deteriorating consumer credit quality also hamper the stock, he said.

Citi made the deal for Golden State, the holding company for California Federal Bank, instead of tackling its image problem head on, Mr. Hendler said.

Michael L. Mayo of Prudential Securities said that Citi's investors fear the Golden State deal may dilute the stock. Investors applauded Citi's decision to divest Travelers Property Casualty Co. …

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