Citigroup (C) Slammed As It Could Need the Most If Fed Decides to Raise Capital Targets
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Citigroup, Inc. (NYSE: C) shares are under heavy pressure Monday on concerns the Federal Reserve could require more capital from the nation's top banks to prevent another financial crisis. Citigroup may be among the banks in the worst shape under such a scenario.
The Federal Reserve Daniel Tarullo said Friday that banks could be ordered to hold capital ranging from 8% to 14% of assets, adjusted for the amount of risk they pose, as noted in the Wall Street Journal.
While no decision has been made, in some cases the capital requirement would be double the 7% mandated by Basel.
"No one wants another TARP," Tarullo said.
In a graphic included in the Journal article, Citigroup would require another $13 billion under a scenario calling for a 10% capital target, the most among the banks highlighted. Morgan Stanley (NYSE: MS) would need $4 billion, JP Morgan (NYSE: JPM) would need $1 billion and Goldman Sachs (NYSE: GS) has excess capital of $4 billion. Bank of America was the source of the research for these estimates.
Notably excluded from the list was Bank of America (NYSE: BAC) themselves, although a recent research report from Citi suggested that the company is still cheap even if it was forced to hold 10% Tier 1 common. Wells Fargo (NYSE: WFC) was also not included in the graphic.
Link to Wall Street Journal article.
Shares of Citigroup are down 2.8% today to $38.73.
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The Federal Reserve Daniel Tarullo said Friday that banks could be ordered to hold capital ranging from 8% to 14% of assets, adjusted for the amount of risk they pose, as noted in the Wall Street Journal.
While no decision has been made, in some cases the capital requirement would be double the 7% mandated by Basel.
"No one wants another TARP," Tarullo said.
In a graphic included in the Journal article, Citigroup would require another $13 billion under a scenario calling for a 10% capital target, the most among the banks highlighted. Morgan Stanley (NYSE: MS) would need $4 billion, JP Morgan (NYSE: JPM) would need $1 billion and Goldman Sachs (NYSE: GS) has excess capital of $4 billion. Bank of America was the source of the research for these estimates.
Notably excluded from the list was Bank of America (NYSE: BAC) themselves, although a recent research report from Citi suggested that the company is still cheap even if it was forced to hold 10% Tier 1 common. Wells Fargo (NYSE: WFC) was also not included in the graphic.
Link to Wall Street Journal article.
Shares of Citigroup are down 2.8% today to $38.73.
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Doesn't even raise my blood pressure
John on Jun 6, 2011 06:46 PMMark as Spam | Reply to this comment
If C was required to raise 13 Billion, all they would need to do is offer more attractive prices on the remaining several hundred billion in Citi Holdings assets that are already earmarked for sale. As each of these "riskier" assets comes off the books, any proposed capital requirement will go down even as the money comes in to cover it. It's never ideal to hold a "fire sale" but the outcome would be just fine - maybe even a blessing in disguise.