Bank run on Citibank?

Question

Presently, Citibank stock is trading at a level that implied an almost imminent bankruptcy. Most likely, on the basis of assets and liabilities, properly valued, it is insolvent.

What also complicates matters is that it is a global institution with deposits in non-dollar currencies. That would complicate the task of making depositors whole in case of its collapse.

What surprises me is that, as far as we know, it is not yet experiencing a bank run. If I was a client of Citibank, especially a foreign client but also a domestic, I would likely withdraw the money even if I was covered by FDIC guarantee, but certainly would do so if I was not covered.

John A. Weeks III · Accepted Answer

That is because your assertion in the first paragraph is not accurate, there for there is no bank run. Citibank is solid. They have many, many divisions, and only a few divisions have exposure to the flaky mortgages. If Wall Street thought that Citibank was insolvent, its stock would be trading at 2 cents a share, not $7 a share (based on CPRZ, the preferred stock, which key company owners have, as opposed to common stock).

-john-

ewmpsi · Answer

Citi made some of its money on risky business:

Citi Mortgage bought new home loan mortgages before the ink could dry on the original mortgagers paperwork. Many of these loans turned out to be bad business (as the current crisis suggests).

CitiFinancial makes high interest loans to risky clients with questionable collateral and income (also proven to be a poor business model).

Citi Cards would give cards to anyone provided they were above ground which adds to the list of risky entities under the Citi umbrella.

Citi has been described as a black hole, courtesy of a lack of transparency; we don?t know what all Citi is comprised of. The speculation is that Citi will be broken up, the question is?is there a viable business to be made out of what?s left, deposits, lending, holdings?who knows!

As for a ?run? on Citi, whether or not it is or is not insolvent in its present form is not as important as whether it can continue to raise capital and access government funds until it can be broken up and revamped into a business with a promising business model capable of surviving the economic times.

Happy investing!

Bank run on Citibank?

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