"By any measure of financial strength, Citi is among the strongest banks in the industry," Citigroup CEO Vikram Pandit said today in a statement announcing the bank had reached a deal with the Treasury to pay back $20 billion of the money it was given by the government under the Troubled Asset Relief Program. Those are some bold words for the CEO of a bank that was going for 97 cents a share less than a year ago and whose financial health is not exactly well regarded, and makes us think that probably Pandit has a dog-eared copy of The Secret in the top drawer of his desk. But just because you put something out into the universe like that doesn't mean it's true.
The Times looks at Citi's plan to sell off $17 billion of stock as early as this week and issue up to $7.2 billion by the first quarter of next year, and sounds a skeptical note:
The moves will result in a pre-tax loss of $10.1 billion that will likely be taken in the fourth quarter from accounting charges taken on the value of the repaid preferred shares and the cancellation of the insurance plan. The new stock offering, meanwhile, will severely dilute erode the value of existing Citigroup shares. Once the repayment deal is completed, it will still take several more years to clean up the financial carnage. Citigroup has not posted a substantial profit in seven quarters, and the bank is expected to muddle through most of 2010 amid another wave of mortgage and credit card losses.
Let's hope The Secret works for Vikram Pandit. If Citigroup teeters again, it's unlikely taxpayers will allow the government to step in and help out this time. After all, we can't afford it, with 10 percent of us out of work, and the rest of us struggling to pay back the jacked-up interest rates on our Citibank credit cards.